Paper for presentation at the 9th Annual Conference of Agricultural Economics

Research Association (India), New Delhi

Aquaculture is a fast growing industry with an average annual growth rate of about 12 percent during the past decade. Asia was the leading region in aquaculture, with 85.8 percent of global production of the total aquaculture production, fresh water fish (carps) accounted for 49.5 percent globally. According to World Bank (1999) estimation, the cultured fish production was doubled during 1990-1996 and from the present 26 million tons it is expected to reach 39 million tons by 2010.

The aquaculture production in India has registered remarkable growth in recent decades. The total production from aquaculture has increased from 7,88,310 tons in 1987 to 17,68,422 tons in 1996, with a substantial growth of 124 percent. Even after rapid growth in the industry, India has exploited only 10 percent of its aquaculture potential. Indian carp farming evolved from a mere subsistence level in 1980 to one of the worlds’ leading producers by mid 1990’s. India contributed around 11 percent of the world’s inland fish production in 1995. The aquaculture production has increased from 512 thousands tons in 1984-85 to 1763 thousands tons in 1994-95 (Government of India 1996). Share of aquaculture in total inland production doubled from 46 percent in 84-85 to 84 percent in 1994-95.

Indian aquaculture production consists mainly of Indian major carps (70 percent) and common carps and other carps constitute about 5 percent of the total fresh water aquaculture production. India exported around 2,000 tons of carps annually (MPEDA 1999). Indian fresh water aquaculture is mainly based on carps such as Indian Major carps (catla, rohu and mrigal), kalbasu, silver carp, grass carp and common carps etc. 

Fresh water aquaculture resources in the country comprise 2.25 million hectares of ponds and tanks 1.3 million hectares of bheels and derelict waters 2.09 million hectares of lakes and reservoirs as also 0.12 million kilometres of irrigation canals and channels. India being the carps account for bulk of the production (Ayyappan, 2000). However, the average yield per hectare is 2,200 kg, which is lowest in Asia. Some of the major factors, which influence the productivity, need to be investigated in order to enhance the productivity. There exists a larger yield variation between the regions and farms. While the Punjab farmers produce 4,170 kilograms per hectare, the same productivity is as low as 1,270 kilograms in Maharashtra.

Aquaculture Exports

Agricultural exports comprised about 27% of the total exports from India during   1986-87 and the share dropped sharply during the post-reform period to 20 percent in 1996-97. However, the share of seafood exports has been 16% of the total agricultural exports and is steadily increasing in absolute terms.  The absolute value of seafood exports has increased from US $ 1,122 million to 2,973 million indicating an increase by 265 percent.  Thus, though the share of agricultural sector in the total exports is decreasing the seafood export has been maintaining its share and steadily increasing.

The contribution of cultured aquaculture products increased from 33 percent in 1988-89 to 52 percent in 1998-99. The spectacular progress of aquaculture is worth noticing in value terms.  With in a period of 10 years the value of cultured shrimp increased from 48 percent to 74 percent.  Though major part of the export of cultured products is shrimp, the contribution of carps such as rohu is increasing over the years.  Aquaculture production and exports continue to be an extremely focused sector during the Ninth Five Year Plan (1997-98 to 2001-02).

Until recently India has been exporting mainly freshwater prawn but from 1996-97 onwards India started exporting other freshwater aquaculture products also. India started exporting negligible quantity of freshwater aquaculture products in filleted form from 1996-97 onwards.  It can be seen from the table 2 that India exhibit a lot of variation and India's trade partners are also changing.  The major buyer of Indian freshwater fishes is China and Bangladesh followed by Middle East.

The analysis of the freshwater fish exports shows that the quantity and value of cultured shrimp as a proportion of the total shrimp exports has been rising steadily. Further, a small quantity of Indian major carps were also exported since 1996-97 indicating that export potential exist to absorb higher level of production when the domestic market cannot absorb the increased production at current prices.

Price Behavior of Aquaculture Products

The analysis of the price changes of some of the important species of aquaculture shows that there is a fairly wide increase in fish prices over a period of 10 years.   The price rise is highest for rohu from 1988 to 1999 in Haryana state.   The price of rohu increased by 126 percent during 1988-94 and by 30 percent in 1999.  Similarly, there has been substantial increase in the price of catla, mrigal and other carps during the first half of the decade 1988-89.

However the rate of increase in prices has reduced during the second half of the decade (i.e. during 1993-94 to 1998-99).  It was observed that on an average during the period 1993-94 to 1998-99 the price increase is only around 10-15 percent.  As compared to early 90s the price rise has slowed down due to variety of reasons.

Firstly, the volume of production has gone up significantly and consequently the market prices have slumped.  Secondly, due to recession and other changes in the economy the inflation rate has come down significantly.  The rate of inflation, which was around 10-12 percent during early 1990s, came down to 3-4 percent during 1995-96 onwards.  During the same period the cost of production of fish per kg has increased enormously eroding the profitability of fish farming. This increase in the cost was due to increase in the intensity of production.

The price behavior of producer price is important to assess the terms of trade between aquaculture sector and other sectors.  The farm harvest prices since 1993-94 is showing marginal increase in current price by the index of prices paid by the fish farmers.  The average real harvest price of aquaculture products is not showing any upward trend.  Although, the comprehensive time series data on gross income and cost of cultivation is not available, the net income in real prices is just maintained or has decreased. 

The observation of consumer prices and price spread over the years suggests that the adverse effect of increase in input prices has not been compensated, as the marketing margin remained high, throughout the years.

Sustainability of Aquaculture: Case Study of Andhra Pradesh

Commercial aquaculture started in Andhra Pradesh in the early 1980's with 14,000/ha area and 80,000 tons of production.  Presently, Andhra Pradesh stands second in aquaculture with 75,100 hectares and 2,03,970 tons production with a productivity of 4,000 - 5,000 kg / hectare being second highest in the country. 

Initially the low-lying paddy growing areas, which had low productivity were converted into fishponds.  The lucrative market in West Bengal has contributed to a large extent to the spurt of area under freshwater aquaculture in the early 1990's.  Farmers, hitherto agriculturists have expanded their area under fish production substantially over the years.  The fish production per unit of pond has increased manifold over the years.  The production was a mere 500 kg/hectare in 1989-90 while it is now at a whopping high of 4,000-5,000 kg/hectare.  The production of aquaculture products has continuously shown an increasing trend during the mid 1990's due to increased usage of fish feed and other advanced technologies.  However, the production per unit area is almost stagnant for the past couple of years.

The total fish production (capture and culture) in Andhra Pradesh during 1989-90 was    212,700 tons and 355,960 tons in 1995-96.  The contribution of aquaculture to total fish production of the state is 9 percent with 203,970 tons production.  The total aquaculture production in Andhra Pradesh is 203,970 tons, which is 9 percent of national production and it stands second in aquaculture production in the country. 

Andhra Pradesh aquaculture system is mainly of poly culture type.  The ponds are of trench type with average depth of 6 feet.  The pond size varies between 1 hectare to 4 hectares with an inlet and outlet for water entry and discharge.  The bunds are planted with coconut trees.   The main species cultured are catla, rohu and mrigal.  Mrigal is found in very small proportions in the species composition and that to in few areas.  Few farms have started growing freshwater prawn as bottom feeder in recent times. The freshwater aquaculture is taken as a sole enterprise or stand -alone activity.  There are few farms where in aquaculture is practiced as a part of the farming system where paddy is main crop in well fertile soils.

Developmental Policies: In the late 1980's and early 1990's Government of Andhra Pradesh had introduced subsidy schemes for taking up freshwater aquaculture to promote and develop the aquaculture industry.  Incentives were also given to farmers who take up fish farming.  With the expansion of aquaculture industry the Government stopped giving subsidy to fish farmers during mid 1990's, still the area under aquaculture is growing due to high demand in West Bengal market.  Production also touched peak value due to usage of high quality / high quantity of feed and other production technologies.  Presently Government of Andhra Pradesh has banned the conversion of paddy growing areas into aquaculture ponds.

Land Ownership / Tenure of Security: Majority of the farmers are practicing aquaculture in their own land holdings.  Some of the big private entrepreneurs have taken small holdings from different farmers in a cluster for lease.  The period of lease varies between three to five years.  Due to the expansion and growth of aquaculture industry the lease amount per ha pond has increased from Rs. 7,500-9,000 in 1995 to Rs. 12,000 -18,000 in 1998.  It was very low at Rs. 3,500-5,000 during mid 1980's when aquaculture industry was in its take off stage.

Indicator of Unsustainability in carp farming practices in Andhra Pradesh

The cost and returns of freshwater aquaculture has undergone enormous changes and the fish producers have been experiencing deterioration in their profitability.  The results of a comparative analysis show that gross profit has increased from Rs.47,414 to Rs.70,120. On the other hand, the net profit has decreased from Rs. 41,667 to Rs.34, 028 during the corresponding period.  The yield per hectare during 1992-93 was only 3903 kg/ha, which has doubled in 1998-99 to around 6000 kg/ha.  However, the maximization of production has not maximized the profitability

Comparison of costs and returns from 1992-93 to 1998-99

Note: The figures for 1992-93 are from Rao and Raju (1997)

Purchasing power and fish prices

Economists suggest several methods to measure the changes in the degree of economic access to food.  One way to measure such changes is to examine the trends in the proportion of per capita income required to buy a unit of food.  Using the retail prices it was observed that the average per capita income required to buy a kg of fish in the urban areas declined by 50 percent in 1994-95 in the case of rohu, 20 percent in the case of pomfret, which is a marine fish (table 6).

Average per capita income and retail prices of fish

Note: Figures in parenthesis indicate percentage to per capita income

The differences exist between the rate of increase in per capita income at current prices and that in the retail prices of fish.  During the year between 1986-87 and 1993-94 while the average per capita income increased at the rate of around 10 percent the prices of fish increased at the rate of 6 percent.  Thus, the proportion of income required to buy a kilo of fish has decreased, over the years.  The economic access to fish has increased in these years.  If certain sections of the population are not able to have access to fish, due to very low purchasing power, the solution lies in creating more employment and income opportunities for them rather than solely relying on keeping the product prices at a level, which may not encourage farmers to adopt new technology, and making investment for the production.

Conclusions and Policy Implications

The diversity in Indian environment between the regions and states, makes the growth prospects of aquaculture to differ with varying degrees of commercialization and level of development of infrastructure, consumer demand and inter-state movements. In the years to come the crop sector which is most protected is likely to be free from restrictions and exposure of this sector would make it to operate without state support.  This would favour the growth of alternative sub sectors such as aquaculture.  Under the liberalized environment priority accorded to attain national food self-sufficiency becomes secondary, because once the economy augments its export capability, imports can be arranged as and when it is necessary.  It is more likely that due to liberalization the cropping pattern would shift more towards livestock and aquaculture, which have higher value.  With declining food subsidy to cereals, the consumption of fish and meat products would become the best alternative source of nutrition to the rural poor.

Traditionally Indian marine exports, consist only marine and cultured shrimps.  They still continue to be important but over the years the export composition is changing and some of the freshwater prawn and fish has emerged in the export market.  Export of aquaculture products such as freshwater prawn and rohu are an important item, in the total marine exports.

India initiated the aquaculture development programmes during 1980s and 1990s.  There were restraints to the fish farming initially but the growth in production was accelerated in some regions such as Andhra Pradesh, Punjab, Haryana and Bihar.  Hopes have been raised about the increasing domestic consumption inter state movements and exports with the changing food preferences and urban growth.

The composition of species is responding to market changes. It is becoming concentrated in rohu, common carps and fresh water prawns.

The price analysis of carps shows that there has been substantial increase during the first half of the decade and farmers have favourably responded to this increase through increase in the area and productivity.  However, the price increase during the second half of the decade is only marginal with increase in production.  Thus, the higher level of production has depressing impact on price in the absence of well-developed domestic and export market.  It is essential that along with improvement in the production, market accessibility also should be increased for overall development.  Increased fish production from aquaculture lowers price, which reduces the quantity supplied from common water bodies and eventually reduces the profitability of fish farms also.  There is considerable consumer well fare gain associated with lower price, specially to rural poor, with elastic demand.  But unless the producers share in consumer rupee is increased, production becomes uneconomical in the long run. 

The common threat to fisheries and aquaculture is from encroachment and industrial pollution of common water bodies.  The development of public utility services have undermined the importance of the village tanks, rivers as a source of drinking water, which has led to decline in its collective management.  Further, the rivers and other water bodies are becoming polluted with industrial and sewage waters.  This would eventually cause threat not only to the capture fisheries but also to aquaculture. 

The changes required in institutional structure, infrastructure and land leasing policies to meet the challenges of production, needs to be streamlined.  It is found that the changes that are taking place in the production system are affecting small and marginal farmers.  The farm and pond size is increasing and fish farms of smaller size are not found to be economical.  There is a need to device mechanisms to protect these farmers and also strengthen their marketing capacity to take the advantage of new opportunities.