This product doesn’t come to mind when one thinks of a commodity with an annual export potential of over $100 million. But that’s exactly what India’s isabgol exports are worth. Yes, we’re referring to the same constipation reliever that your grandmother used to recommend!

Satyapal Menon | The Dollar Business

Take a train journey from anywhere to anywhere across the length and breadth of the country and the most common sight that unfolds are vast expanses of dry and arid wasteland stretching to the horizon. The sight provokes us to seek answers to the inevitable question: How can a country, populated by more than a billion, jostling for space and struggling for livelihood options, afford the luxury of leaving millions and millions of hectares of land untended? Is this not indicative of a barren mind, bereft of ideas, pervading the corridors of power, and a state of utter haplessness to transform the landscape into fertile and viable vistas. We have departments and departments of wasteland management, which are proving to be total waste on the public exchequer, with nobody having an inkling about the purpose of their existence. Call it fertile imagination taking wings or just a mirage, but there are small communities, which have strived and thrived to create oases on such tough terrains with very little help from the government. The Dollar Business, in its endeavour to explore and bring to light export products existing in relative obscurity, zeroed in on psyllium, and believe it or not, the story of this product turned out to be a fascinating narrative of adversity translated into opportunity, initially cultivated by small communes on the sun scorched semi-desert soil of Gujarat.

Indian monopoly

Indian Psyllium (scientific name Plantago Ovata) is as also referred to as isabgol – a name derived from its Persian origins. Both the husk – dried seed coat or epidermis – and the dried ripe seed of ispaghula are processed and used globally as ingredients of drug products for constipation, chronic diarrhoea and dysentery. Isabgol is also widely used in drugs for controlling blood cholesterol levels.

Believed to be of Iranian origin, isabgol is a product of ancient wisdom. And for those who consider such therapeutic legacies with a strong sense of scepticism and disdain, here are some proven pearls of information about it. Processed isabgol is one of the most widely used ingredients in laxatives and treatment of cholesterol related problems. India is the world’s largest producer and, for all practical purposes, the only exporter of it. And here is the clincher for all the sceptics – FMCG behemoth Procter & Gamble is a major buyer of it.

Greener pastures

Sandy soil and a combination of dry, sunny and wintry climates provide conducive environment for isabgol cultivation. Gujarat and Rajasthan, have vast expanses of semi-arid regions and conditions ideal for its cultivation, which explains domestic production being largely limited to these two states. Initially, till the early 1980s, the market for it was confined to domestic consumers, but with information about its intrinsic medicinal and nutritional value spreading across the globe, isabgol witnessed a surge in exports. The crop acreage increased and many took to farming this crop to make hay, or more appropriately, isabgol husks, while the sun scorched. Processing units proliferated to cater to the constantly increasing demand in world markets, specifically from United States and Europe. Many middlemen and traders also jumped into the fray to grab the husks with both hands and exploit the ignorance of farmers when it came to pricing. “We have been growing isabgol for generations. When we used to sell it only in the domestic market, transactions were few and not that considerable. There was no hustle bustle in the market. But now, with demand in foreign countries, we are entangled in dubious prices offered by traders and complexities involved in procurement and auctions. But we do not have any other platform to sell our produce with no help coming from the government,” a septuagenarian farmer in Unjha, a small town in Mehsana district, around 100 km from Ahmedabad and a hub for isabgol, who did not want to be named, told The Dollar Business. Speaks volumes about much-hyped Gujarat, does it not?

 

 

“While the input costs for isabgol cultivation have increased, prices being offered to us have remained more or less the same over the years, despite auctions by Unjha Agriculture Producers Market Committee (APMC),” he added. Investigations and enquiries by The Dollar Business also revealed that the auctions are often contrived, with cartels and syndicates dominating the bidding process.

 

Gujarat’s loss

On the surface, Unjha does not strike you as a location occupying a position of prominence on the global trade map. The affluence and vibrancy, usually associated with multi-million dollar export hubs, is conspicuously missing. But beyond this rather modest façade, is a town that accounts for a considerable chunk of isabgol exports from India. In fact, it is the biggest marketing, trading, processing and production location of isabgol in the country.

Earlier, Gujarat used to enjoy an absolute monopoly over isabgol production, with the crop being cultivated in Banaskantha, Kutch, Mehsana and Jamnagar districts of the state. Later, as the demand started shooting up, farmers in Rajasthan – which also has a similar conducive environment and soil conditions for isabgol – also took up cultivation of this crop. Presently Gujarat, Rajasthan and Madhya Pradesh are the only states in India involved in isabgol production, with about 60,000 hectare under isabgol cultivation in the states of Gujarat and Rajasthan put together.

 

 

While, over the years, climatic, pricing and cost vagaries have led to dwindling cultivation in Gujarat, the same in Rajasthan is striving, with the latter edging out the former in isabgol production. Validating this, Anil Mishra, Managing Director, National Multi-Commodity Exchange of India Limited (NMCE), the only exchange in India on which isabgol futures were being traded until recently, told The Dollar Business, “Over the last five years, Gujarat’s share in isabgol production has declined from 35% of the total output in India to 20%, with both Rajasthan and Madhya Pradesh augmenting their output and share.” Giving a broader overview of isabgol production in India and its decline in Gujarat, Mishra said, “India’s total production of isabgol is about 1.3 lakh MT. Of this, while Gujarat accounted for about 33,000 MT in FY2008, today, it accounts for just 20,000 MT.”

 

Stunning elasticity

If one goes by Mishra’s data, along with that of Ministry of Commerce which reveals that 32,465.6 MT of isabgol was exported from India in FY2014, one can arrive at an inference that about a quarter of the total isabgol production in India is exported – something that not many agri-commodities can boast of. Interestingly, the 18.2% y-o-y decline in exports in FY2014 was not due to a fall in demand in foreign markets, but because of lower output in India. This is reflected in an International Trade Centre (ITC) report, published in June 2014, which quotes several global buyers. In the report, C.E. Roeper, a Hamburg, Germany, based supplier of natural raw materials, claimed that over half of the 2014 harvest was in and, that in view of the increasing market demand, there would be less material available in 2014, as compared to 2013. The company claimed that price increases had already taken place for the highest grade material (99% purity; 100 mesh powder particle size). Hence, C.E. Roeper had advised its customers to cover their requirements soon.

In the same report, BI Nutraceuticals, a leading importer and distributor of isabgol ingredients, claimed, “With approximately 75% of the crop already in the market, only 25% is left to carry supplies through to the next harvest in 2015. Suppliers report that psyllium crop is short this year for several reasons, but primarily due to limited planting during the sowing season, as well as, rain and hail storms, which led to premature harvesting. As a result, the overall yields of good quality psyllium are significantly less than last year.” BI Nutraceuticals also claimed that isabgol prices were already over 30% higher (y-o-y).

Apart from reflecting the demand-supply for isabgol, the report also indicates that its pricing is entirely supply driven, with any fall in supply leading to immediate price rises. The report also indicates the absolute dependence of global isabgol buyers on India, giving Indian supplier the bargaining power. But Pravin Patel, Partner, Sun Psyllium Industries – one of the major exporters of isabgol – does not agree that India has an advantage in terms of pricing. “It is a buyer’s market, not a seller’s market, because prices are dictated by the importers, not by the exporters. United States has a tendency to offer lower prices, and we have to cater to its demands,” he told The Dollar Business. It does definitely beat economic logic. Doesn’t it? How can the market for a product with only one supplier be a buyer’s market?

 

 

For the taking

Another question that begs an answer is why despite the market scope and demand, isabgol cultivation is restricted to just three states in India? Does it mean other states don’t offer the conditions necessary for its production? To find the answer to this question, The Dollar Business spoke to Dr. G. Sathyanarayana Reddy, Director (Research), SKL Telangana State Horticultural University. “After six years of research, we have successfully grown isabgol or psyllium from Gujarat Grade 1 seeds at our Hyderabad facility in Rajendranagar. The results have proved that Telangana, Northern Karnataka and some parts of Maharashtra have ideal soil and climatic conditions for it. It requires drained sandy soil. It is not dependent on monsoon and could be grown after irrigating the land for 10 to 15 days,” Dr. Reddy said, clearing our doubt. Dr. Reddy also said that the yield/hectare for isabgol is about 1.3 MT. Armed with this information, The Dollar Business Intelligence Unit did a field survey and found that cultivating isabgol in a hectare of land costs about Rs.80,000 (Rs.3,000 for ploughing, Rs.5,000 for fertilisers, Rs.60,000 for labour and about Rs.12,000 for irrigation and miscellaneous). Given FY2014’s average export price of $3,880.3/MT, this means an eye-popping RoI of 243.9% (after processing cost of Rs.8,000 for 1.3MT) in a matter of just 110-120 days.

On a platter

Despite its multipurpose properties – therapeutic and nutritional – and global demand, it is quite strange that there are no genuine initiatives from the government to promote isabgol’s cultivation across India. Moreover, for reasons inexplicable, farmers have been left at the mercy of natural elements and traders. Psyllium production and marketing continues to be unstructured, unorganised and unpredictable. But all this also means that exporting, if not cultivating, isabgol is a treasure chest waiting for you.