The Indian federal government’s new ‘beef ban’ is producing anxiety in three large industries: meat, leather, and dairy.
The Prevention of Cruelty to Animals (Regulation of Livestock Markets) Rules, 2017 is not an outright ban on slaughterhouses. What the new Rules do, however, is make it next to impossible for slaughterhouses to operate by disrupting their supply chains.
This is a poignant example of how India’s political climate can affect the country’s economic development – hurting domestic and foreign businesses in the process.
The new Livestock Market Rules explained
India’s livestock markets act as go-betweens: selling (often older or less productive) animals from rural farmers to larger companies and estates. The new Livestock Market Rules prohibit the sale of “cattle” for slaughter at livestock markets, while increasing the difficulty for these markets to sell “cattle” for other purposes.
Importantly, the new Rules use a controversially broad definition of “cattle.” The Livestock Market Rules, 2017 define “cattle” as bulls, bullocks, cows, buffalo, steers, heifers, calves, and camels. Animal markets cannot sell any of these animals for slaughter.
The Rules also prohibit livestock markets from operating 25 kilometers from a state border and 50 kilometers from an international border. This appears designed to frustrate any cross-border activity that would violate the laws of a state with stricter laws on cattle or beef.
Additionally, all existing livestock markets must now register with the newly formed Animal Market Committee. If the Committee rejects an applicant, that applicant can no longer operate their livestock market.
The compliance creep
Cow beef is already illegal in most Indian states; the ‘cow’ is considered a sacred animal to India’s Hindu majority. Buffalo beef, however, remains popular – though still taboo – in Indian domestic markets. The new Rules effectively shut down the beef industry’s supply chain through compliance requirements.*
Aside from prohibiting the sale of slaughter-bound bovine, the new Rules also require a veterinary certificate and records of past ownership for “cattle” when sold for dairy or agricultural purposes.
The animal market itself must conform to specific sizing norms and infrastructural capacity – criteria that the vast majority of existing animal markets certainly fail to meet.
Impact on meat trade
For a nation with so many vocal vegetarians, India exports a lot meat. According to the US Department of Agriculture, India is the second biggest exporter of (buffalo) beef in the world. Furthermore, India’s buffalo meat exports have grown from US$5.5 hundred million in the 2008-09 fiscal year (FY) to US$5.5 billion during FY 2016: a compounded annual growth rate (CAGR) of 29 percent.
The Indian government does not release FDI data related specifically to meat production and export. However, the government does allow 100 percent FDI under the automatic route in food processing. As of September, 2016, FDI inflow to the sector reached a record US$727 million for the FY 2016-17.
According to the Ministry of Commerce and Industry, there are 81 licensed companies engaged in meat processing and its exports. Under Make in India, the government has approved 16 new, state of-the-art slaughterhouses across the country. Four are already operational – including one private public partnership (PPP) – in Visakhapatnam built on 11.4 acres of land that can process 1000 cattle a day.
All slaughterhouses in India, regardless of how state-of-the-art, rely heavily on livestock markets to supply buffalo – an estimated 90 percent of their beef came from these now banned markets. India’s buffalo beef supply comes almost entirely from rural farmers who sell their buffalo once they can no longer produce milk or do agricultural work.
Without the help of livestock markets, meat processers will find it next to impossible to establish reliable sourcing from such a disparate constellation of cattle owners.
Impact on the leather industry
India is home to a dynamic US$12 billion leather industry, which supplies both treated leather and finished retail goods to international brands like Armani, Prada, and Zara. In fact, the Modi government targeted the leather industry under its Make in India initiative, hoping to boost its turnover to US$27 billion by 2020.
The new Livestock Market Rules, however, dampen the government’s own projected high growth for leather in India. Not only will the Rules cut off a primary supply chain for the leather industry – they also cut off the actual supply. The 2017 Rules stipulate that bovine, which have died of natural causes cannot be “sold or flayed for leather” but must instead be incinerated.
International retailers are currently looking to Bangladesh for steady supplies of leather.
Impact on dairy industry
India exports so much beef because Indians consume so much dairy. India is the world’s largest consumer and producer of milk and dairy products (both buffalo and cow). Rural, small-scale farmers supply much of this dairy through buffalo, that are later sold to livestock markets when they can no longer produce milk.
Indeed, rural farmers considered a buffalo to be a double investment: after the buffalo can no longer produce milk, they retained their market value in the beef industry. Not anymore.
Under the Livestock Market Rules, dairy producing bovine will no longer possess such a strong market value – becoming instead an economic liability for rural farmers. Dwindling buffalo ownership is sure to affect India’s milk supply.
Shrinking state autonomy
The new Livestock Rules do more than just, effectively, ban beef – they also erode the rights of individual states. Under the Indian constitution, states have legal policy control over cattle slaughter while the federal government dictates national norms on animal welfare. Now, the federal government has effectively criminalized the beef industry’s primary supply chain: be it for cow or buffalo.
The government previously championed state agency with the popular “competitive federalism” slogan: individual states are quicker and more successful in implementing business friendly reforms than the federal government. In taking away the states’ ability to legislate on key industries, the new Livestock Rules send a mixed message to foreign investors.
Monitor reform agendas to remain profitable, compliant
Modi enjoys marketing India as open for business – that “the sky is the limit” for investment opportunities, as he recently told a St. Petersburg audience. Yet, at home, Modi often relies on divisive policies to solidify his power base.
Unfortunately, economic reform and sectarian policies are not always mutually inclusive. By enacting the ‘beef ban’, Modi has hurt three major industries in India that employ millions of people and attract considerable foreign investment.
The new Livestock rules ultimately underscore the importance of a robust understanding of India’s regulatory and political landscape. Foreign investors need to actively monitor reform agendas and their impact on business plans to remain profitable and compliant.
*Editor’s Note: On Tuesday, July 11, 2017, India’s Supreme Court extended a Madras High Court’s stay on the Livestock Rules, 2017. The central government will submit an amended version of the Rules to the Supreme Court in late August for consideration. Until then, the Livestock Rules, 2017 are legally void.
Despite the Supreme Court stay, however, religious vigilante groups (known as ‘cow vigilantes’) continue to disrupt cattle supply chains through violence and intimidation – putting strain on beef, leather, and dairy industries.
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