SHIVTHAR (Reuters) - Ajit Govind Sable's family have owned their farm in Maharashtra for 10 generations, which even for a region that has been farming for more than 10,000 years is long enough to witness plenty of changes.
Two generations back, they started cultivating sugarcane here in Shivthar, a village in Maharashtra's highlands near the Krishna river. India's most industrialised state soon became its largest sugar producer.
Today, it's not sugar the 35-year-old Sable is talking about as he sips sweet tea in the front yard of the low, two-storey farmhouse where half the ground floor houses his turmeric crop.
He's discussing peppers, which he is now growing under polythene plastic coverings. Like an increasing number of farmers in India, Sable is exploiting a shift in taste towards fruits and vegetables among Indians.
"My colleagues grow flowers under poly," Sable says. "But the investment for that is too much for me, so I'm trying out peppers. You can't eat flowers if you can't find buyers for them," he notes.
While many Indian farmers are eager to adjust to changing diets in one of the world's fastest growing markets, the government continues to subsidise the cultivation of wheat, sugar and rice crops to ensure basic food needs for the country's half a billion poor.
The result is overflowing stocks of these carbohydrate-heavy staples and a huge subsidy bill that is adding to a ballooning budget deficit.
India, many agricultural experts say, is spending billions to prop up a traditional farm sector at the expense of investment in new crops and agricultural innovation.
Charts on farms and food link.reuters.com/bat22s
Food spending: US, China, India r.reuters.com/tys22s
India's changing tastes link.reuters.com/zyw99r
India's weak supply chains link.reuters.com/bys22s
Case study:Brittania biscuits link.reuters.com/dys22s
But in a country where one out of five Indians goes hungry, the government has had to focus on foods that fuel or fill -- carbohydrate-heavy wheat, rice and sugar. About 36 percent of women and 34 percent of men in India are underweight. The cost of that undernourishment is high in terms of healthcare, lost productivity and poor quality of life.
At the same time, a growing urban middle-class is consuming more higher-value, high protein foods, which is stoking food price inflation -- as well as changing business and farm models in rural India.
The food chain in India is undergoing deep change.
"There is a view that this is a structural shift and pulses, milk, meat, eggs, fish, protein items -- these are sectors where you need to concentrate," Abhijit Sen, who sits on the government's planning committee, said in a speech on June 5.
RISING MIDDLE CLASS
Those shifts have been under way for years but are accelerating with rapid urbanisation and the expansion of India's middle class. Take Avantika Singh, for example. A consultant in the hotel industry, she lives in an apartment block in New Delhi with her husband Sanjay, a television producer, and their 7-year-old daughter, Romsha.
The Singhs are still fond of traditional Indian food such as idlis and parathas.
But on this day Avantika, 41, is cooking pasta with fresh peppers.
"As a working person, I look at whatever is easy to do and nothing too elaborate," she says. "When you make idlis it's a whole day, day-and-a-half procedure. I don't have that kind of time."
She sees her parents' generation suffering the effects of the sugar-heavy, oily diet they grew up on.
"Even if we make parathas, we don't put butter and ghee in," Avantika says.
India is getting wealthier as well as healthier.
Its 8 percent annual growth, second only to China among major countries, is boosting incomes rapidly in the trillion dollar economy. Per capita income surged to $1,265 in 2010 from $857 in 2006 -- a nearly 50 percent increase -- according to the World Bank and IMF.
Middle class households are expected to grow 67 percent in the next five years, bringing over 53 million households into an annual income bracket between 340,000 and 1.7 million rupees ($7,600-38,000).
Bijay Kumar, managing director of the National Horticulture Board, says having more money than your parents is pushing up demand for high-protein foods.
"Rising income levels are allowing people to spend on high value stuff," he says. "People are more aware of health. They are increasing their intake of fruits in their regular diet."
In 2009-10, Indians boosted spending on fruit and vegetables by nearly 9 percent over the year earlier. They shelled out almost 31 percent more on meat, eggs and fish. Spending on cereals, on the other hand, was flat.
"A dietary transformation is underway in the country and demand for high value, vitamin and protein rich food such as fruit, vegetables, milk, eggs, poultry, meat and fish is increasing," the International Food Policy Research Institute (IFPRI) said in a study this year.
Years of eating an oil-rich, sugary diet high in carbohydrates have left many Indians with a paunch and a health problem. India has the world's largest diabetes population at just below 51 million people, while heart disease is the single-largest cause of death.
Yet hunger is endemic among the country's 500 million poor.
The government of Prime Minister Manmohan Singh is drafting a Food Security Act that promises to expand subsidised wheat and rice well beyond the current 30 percent of the population in a country that is home to 40 percent of the world's malnourished children.
That could mean India spending about $25 billion a year on providing cheap food or about 9 percent of total spending this year -- more than four times the expenditure on healthcare.
While the farm sector is slowly diversifying, it is a declining contributor to growth, despite providing a living to more than half the country's workforce.
About 600 million Indians are dependent on farming -- half the population of 1.2 billion -- even though agriculture makes up only 14.6 percent of the economy and has been declining from 30 percent a decade ago.
A severe drought meant no growth for the sector in 2009-10 and last year it missed its 4 percent target for expansion, officials said, even as the overall economy powered ahead with 8.5 percent growth.
The average size of farms in India is a mere 1.33 hectares -- about the size of two soccer pitches -- and that figure has been steadily declining.
Farmers are finding it ever more difficult to make ends meet. The introduction of high-yielding seed varieties and increased use of fertilisers and irrigation spawned the Green Revolution in the 1960s that allowed India to become self-sufficient in grains. But experts say agriculture innovation and efficiency has stalled in recent years and farmers are getting squeezed by rising costs and inefficient agronomy.
Since the mid-1990s, an estimated 150,000 small farmers have committed suicide, according to the Center for Human Rights and Global Justice at New York University, most of them over debts.
Increasingly, voices in government and among experts are calling for a different approach, one that curbs subsidy spending, tackles inflation and boosts agricultural production of higher-value foods.
CUT SAFETY NETS
Ashok Gulati is a recent recruit to the government's inner circle from the world of research. His white hair and beard marked him out at conferences when he worked for IFPRI in New Delhi.
Now as chairman of the government's commission on farm prices and costs he has moved, as he puts it, from talking a lot with hardly anyone listening to being heard every time he speaks.
Gulati says too much money is going into safety nets such as subsidies and minimum wages when the government should be investing more to boost agricultural growth and innovation.
India's agriculture ministry plans to invest about $4.8 billion in 2011-12.
"I would say you should have 70 percent of resources for growth and 30 percent for welfare objectives, but it's the other way around," Gulati says.
The World Bank has criticised the subsidies as highly inefficient. But they have powerful political supporters, especially Sonia Gandhi, president of the ruling Congress Party, whose vote bank has long been in rural areas.
Gulati also favours modernising distribution networks. Supply chains should be shortened, by making it easier for retailers and food processors to buy direct from farmers.
Although many states now allow retailers to do this outside the mandi, in practice poor infrastructure makes that difficult.
Ganpat Chowdhary, 45, is a trader at a mandi in Pune. Surrounded by piles of rose and pale green mangoes sweating in the fierce summer sun, he has his own problems -- the perishable nature of his products.
About 30 percent of fruit and vegetable production goes to waste in India. Summer temperatures which regularly top 40 degrees Celsius also mean fruit stored without chilling can ripen overnight.
Temperature-controlled warehouses are sprouting up across India but are mostly small-scale private enterprises.
"We are also keen to set up a cold storage facility," Chowdhary says. "It's essential, as damage levels are very high in fruits."
The National Horticulture Board's Kumar says wastage can be trimmed by increasing the amount of cold storage facilities available.
"We need good infrastructure to collect and aggregate farm goods produced in remote areas," he said. "They need to be delivered to consumers as early as possible.
Chowdhary, who's been in the fruit business for the past two decades, has a different idea.
"In the last four to five years, sales of fruit have risen by 25-30 percent. The next stage for us is to go back to the farm and process fruits."
That way he could sell direct to the supermarkets.
SUPERMARKET SUPPLY CHAINS
Devendra Chawla is showing off his display of chutney jars at a branch of a Big Bazaar supermarket in an expensive South Delhi neighbourhood.
Indians are increasingly heading to air-conditioned stores like this, where aisles are packed with choice instead of the tiny mom-n-pop stores where items are lifted off dusty shelves offering just one or two brands of essential groceries.
Chawla says Big Bazaar's size and presence across India allows them to buy from both big distributors and local suppliers.
He sees huge potential for those who get it right. "If the country is growing by 8 to 9 percent, incomes will increase and I think food as a category will get developed," he says.
"The market is so huge that it can absorb many more (retail) brands," says the clean-shaven Chawla, sporting the intercontinental look of open-necked check shirt and chinos.
"The supply chain and cold storage are also getting developed, so I think for the country and for our company, food is a big bet. It's huge."
But the government needs to invest much more in distribution infrastructure, he said.
"If we can develop good infrastructure and then supply chains and cold storage, I think that can make a lot of difference to the country."
India's supply chains are fragmented and often involve several layers of middlemen between tractor and table.
Its road system is clogged and underdeveloped, while railway freight turnaround times are slow with limited availability of refrigerated freight vans. Cold storage of about 24 million tonnes is woefully inadequate for the world's second-biggest producer of fruit and vegetables. All of this means availability of fresh produce is highly regionalised.
It's not unusual to see wooden flatbed carts loaded with vegetables and fruits right on the doorstep even in big cities -- very convenient for shoppers but it does increase the mileage and moves for produce and raising the chance of damage.
Back in Shivthar (Shiva's ground), transportation is also on Sable's mind as his daughter takes the evening's milk from their cow in a metal churn up to the end of the road for collection.
He says he'd like to sell to retail food chains because they offer higher prices, but it's hard to deal with them directly.
"It's a headache to arrange transport according to their needs. I prefer to sell to wholesalers. They buy from the farm gate, so I don't need to worry about the transportation delay and wastage," he says.
($1 = 44.746 Indian Rupees)
(Additional reporting by Mayank Bhardwaj, Ratnajyoti Dutta, Rajesh Kumar Singh, Abhijit Neogy and Krittivas Mukherjee in NEW DELHI; Editing by Bill Tarrant)
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