For 20 years, he worked for private companies overseeing production of cut flowers, ornamental plants and flower seeds. So, in 2005, when P.M. Shiva Prasad began growing flowers on the outskirts of Bangalore, he appeared to be on to a good thing. After four years in the business, however, Prasad was a picture of disappointment: Steep freight costs and fierce competition made his produce uncompetitive in global markets.
By June 2009, after taking a hefty bank loan, Prasad stopped growing carnations and gerbera and switched to the exotic vegetable, bell pepper, or coloured capsicum. Today, he is back in the black - and a much relieved man. Prasad's is not an isolated case.
Even entrenched exporters of cut flowers have had it rough in the past four years. Data from the Agricultural & Processed Food Products Export Development Authority or APEDA indicates that between 2006-07 and 2009-10, the value of flower exports dropped from Rs 567 crore to Rs 294 crore.
"Growing flowers was a very big activity in Bangalore a few years ago, but not anymore," laments Prasad, a botanist by qualification. The Bangalore-Hosur belt in the south and Pune in Maharashtra have been the traditional flower belts largely because of their favourable climate and the logistical support in these regions.
"Cut flower exports have not grown to expected levels because of intense competition in global markets, steep freight and farm management issues," says R. Ravindra, Assistant General Manager at APEDA, the Commerce Ministry body that promotes export of agri-products. The "farm management" issues Ravindra mentions pertain to the lack of close and constant attention growers need to provide the flowers, which are sensitive and perishable products.
For cut flower exports to become viable once again, either producers have to bring down their cost of production or freight rates need to fall. "My production cost works out to Rs 2.50 per stem while I get about Rs 8 per stem on exports. But freight itself takes away Rs 3-4 per stem," says Sridhar Chowdary, MD, Vinayaka Agritech, which grows roses in Tamil Nadu and exports about 25 lakh stems a year to Australia, New Zealand, Singapore and West Asia.
According to Chowdary, Indian rose growers make most of their money during the Valentine's Day season in mid-February, when each stem commands a price between Rs 15 and Rs 20. The recent fluctuations in global currencies did work to the advantage of Indian exporters. But a rise in freight - by 15 per cent in the past two years, ate into those gains. And as Chowdary points out: "While our production costs have increased, buyers have not increased prices."
One way to bring down the production costs is to grow the flowers in regions where agricultural land is cheaper, and labour costs are lower. Thilak Subbaiah, a floriculture consultant in Bangalore, says, these two factors have made African countries an ideal destination for growers. They also enjoy lower freight subsidies, good quality water and sunshine. Also, such regions offer entrepreneurs an opportunity to grow other agri-items and not just flowers.
While the market for cut flowers is in the doldrums, the silver lining is that demand for dry flowers is flourishing. "We have a competitive advantage in this segment with the availability of fauna and flora and workers to go into forests and collect them," adds APEDA' s Ravindra. In 2008-09, dry flowers made up 68 per cent of total Indian flower export revenues. But cut flowers are clearly where the moolah lies. Until the cost structure of Indian exporters changes significantly, cut flowers will continue to be a thorny business proposition.