Thursday, August 23, 2007
India to call wheat import tender on Thursday - source
NEW DELHI (Reuters) - India's State Trading Corp. is set to issue an import tender for an undetermined amount of wheat on Thursday to cover an increase in consumption during winter, a government official told Reuters.
"The government has advised State Trading Corp to call a tender for wheat imports in bulk and containers," said the official, who did not want to be identified.
"The government will decide on the quantity based on the price offers," the official said.
Using containers for the imports would cost less than vessels.
Wheat futures on the Chicago Board of Trade, which hit 11-year highs last week, were 5 to 7 cents per bushel higher on Wednesday on fresh export business, including the Indian tender. U.S. exporters said they expect India to buy Canadian wheat.
The official said the wheat would be for arrival in the winter months of October, November and December, when consumption in northern India peaks.
The country bought 5.5 million tonnes of wheat in 2006, the first imports in six years, and has already contracted 511,000 tonnes this year.
Farm Minister Sharad Pawar has said India would import 3 to 5 million tonnes of the grain in 2007, despite high prices.
"There is a need to import because of needs of food security which we cannot compromise," Pawar told parliament on Monday. "We do not get any happiness from paying high prices."
The government has bought about 11 million tonnes of wheat from local farmers in 2007, up from around 9 million tonnes last year, but needs 15 million tonnes.
It buys grains from farmers at a fixed price, and uses its stocks for welfare programmes, to meet any shortage and to keep prices in check.
Wheat output in India, the world's second-biggest producer, is likely to be 74.9 million tonnes in 2007, up from 69.5 million tonnes last year. That would be the best harvest since 2000, when India produced a record 76.4 million tonnes of wheat.
"The government has advised State Trading Corp to call a tender for wheat imports in bulk and containers," said the official, who did not want to be identified.
"The government will decide on the quantity based on the price offers," the official said.
Using containers for the imports would cost less than vessels.
Wheat futures on the Chicago Board of Trade, which hit 11-year highs last week, were 5 to 7 cents per bushel higher on Wednesday on fresh export business, including the Indian tender. U.S. exporters said they expect India to buy Canadian wheat.
The official said the wheat would be for arrival in the winter months of October, November and December, when consumption in northern India peaks.
The country bought 5.5 million tonnes of wheat in 2006, the first imports in six years, and has already contracted 511,000 tonnes this year.
Farm Minister Sharad Pawar has said India would import 3 to 5 million tonnes of the grain in 2007, despite high prices.
"There is a need to import because of needs of food security which we cannot compromise," Pawar told parliament on Monday. "We do not get any happiness from paying high prices."
The government has bought about 11 million tonnes of wheat from local farmers in 2007, up from around 9 million tonnes last year, but needs 15 million tonnes.
It buys grains from farmers at a fixed price, and uses its stocks for welfare programmes, to meet any shortage and to keep prices in check.
Wheat output in India, the world's second-biggest producer, is likely to be 74.9 million tonnes in 2007, up from 69.5 million tonnes last year. That would be the best harvest since 2000, when India produced a record 76.4 million tonnes of wheat.
Wheat Price Reaches Record as India, Taiwan, Japan Seek Imports
Aug. 23 (Bloomberg) -- Wheat prices in Chicago rose to a record, extending gains for a fifth day, as importers, including India, Taiwan and Japan, sought to buy the grain and adverse weather reduced supply in major exporting countries.
India, the world's biggest wheat consumer after China, plans to buy cargoes of 25,000 to 75,000 metric tons each for delivery from October to December, the New Delhi-based company said on the government Web site. The company will decide how much to import by Sept. 3.
Unfavorable weather has damaged crops in major producers including Australia, Europe, Russia and Ukraine. Global inventories of the commodity used to make bread, pastries and biscuits are expected to fall to the lowest in 26 years by May 31, according to the U.S. Department of Agriculture.
``We may see wheat futures go up further as buyers are rushing to secure more and global supplies are very tight,'' said Takaki Shigemoto, an analyst at commodity broker Okachi & Co., by phone from Tokyo. ``We anticipate a higher-than-expected number for weekly U.S. export sales later today.''
Wheat for December delivery gained 11.25 cents, or 1.5 percent, to $7.43 a bushel by 7 p.m. Singapore time in electronic trading on the Chicago Board of Trade. Prices more than doubled in the past year.
Overseas orders for U.S. wheat supplies are up 86 percent since June 1 compared with a year earlier, USDA data show.
Taiwan, Japan
The Taiwan Flour Millers Association, which represents 34 grain users, issued a tender tomorrow to import 92,000 tons of U.S. wheat after it failed to buy grain on Aug. 21.
Japan's Ministry of Agriculture, Forestry and Fisheries said it bought 30,000 tons of Canadian durum wheat today in a tender under the so-called simultaneous buy and sell system, introduced to loosen government controls over imports.
Grain-growing regions in Australia, the world's third- largest wheat and canola exporter, may have warmer-than-average temperatures in spring, potentially crimping crop development.
There's a 60 percent to 75 percent chance of higher-than- average minimum temperatures from September to November, the bureau of meteorology said on its Web site today.
``There's a shortage of the grain worldwide,'' Pramod Kumar, executive director of Sunil Agro Foods Ltd., said by phone from Bangalore. ``Indian imports will fuel the wheat market globally.''
Record Price
State Trading Corp., run by the government, bought 511,000 tons from Cargill Inc., Toepfer International and Riaz Trading for a record $317 a ton to $330 a ton on July 10 to ensure sufficient supplies and curb inflation.
India may receive offers of $375 to $400 a ton in the new tender, Sunil Agro's Kumar said.
State Trading Corp. is seeking wheat in bulk carriers or containers at eight Indian ports including Mumbai, Kandla, Mundra, Chennai and Tuticorin. Suppliers are required to quote prices on the basis of the port and month of delivery.
India was the world's third-biggest wheat importer in the year ended June 1, with purchases of 6.7 million tons, according to the U.S. Foreign Agricultural Service.
India, the world's biggest wheat consumer after China, plans to buy cargoes of 25,000 to 75,000 metric tons each for delivery from October to December, the New Delhi-based company said on the government Web site. The company will decide how much to import by Sept. 3.
Unfavorable weather has damaged crops in major producers including Australia, Europe, Russia and Ukraine. Global inventories of the commodity used to make bread, pastries and biscuits are expected to fall to the lowest in 26 years by May 31, according to the U.S. Department of Agriculture.
``We may see wheat futures go up further as buyers are rushing to secure more and global supplies are very tight,'' said Takaki Shigemoto, an analyst at commodity broker Okachi & Co., by phone from Tokyo. ``We anticipate a higher-than-expected number for weekly U.S. export sales later today.''
Wheat for December delivery gained 11.25 cents, or 1.5 percent, to $7.43 a bushel by 7 p.m. Singapore time in electronic trading on the Chicago Board of Trade. Prices more than doubled in the past year.
Overseas orders for U.S. wheat supplies are up 86 percent since June 1 compared with a year earlier, USDA data show.
Taiwan, Japan
The Taiwan Flour Millers Association, which represents 34 grain users, issued a tender tomorrow to import 92,000 tons of U.S. wheat after it failed to buy grain on Aug. 21.
Japan's Ministry of Agriculture, Forestry and Fisheries said it bought 30,000 tons of Canadian durum wheat today in a tender under the so-called simultaneous buy and sell system, introduced to loosen government controls over imports.
Grain-growing regions in Australia, the world's third- largest wheat and canola exporter, may have warmer-than-average temperatures in spring, potentially crimping crop development.
There's a 60 percent to 75 percent chance of higher-than- average minimum temperatures from September to November, the bureau of meteorology said on its Web site today.
``There's a shortage of the grain worldwide,'' Pramod Kumar, executive director of Sunil Agro Foods Ltd., said by phone from Bangalore. ``Indian imports will fuel the wheat market globally.''
Record Price
State Trading Corp., run by the government, bought 511,000 tons from Cargill Inc., Toepfer International and Riaz Trading for a record $317 a ton to $330 a ton on July 10 to ensure sufficient supplies and curb inflation.
India may receive offers of $375 to $400 a ton in the new tender, Sunil Agro's Kumar said.
State Trading Corp. is seeking wheat in bulk carriers or containers at eight Indian ports including Mumbai, Kandla, Mundra, Chennai and Tuticorin. Suppliers are required to quote prices on the basis of the port and month of delivery.
India was the world's third-biggest wheat importer in the year ended June 1, with purchases of 6.7 million tons, according to the U.S. Foreign Agricultural Service.
Chinese firm eyes Indian wheat market
NEW DELHI: A Chinese wheat producer has decided to increase its production with an aim to tap the market in India, which is importing the commodity for the second year in a row.
Shandong Zhouyuan Seed and Nursery Co Ltd would expand its wheat seed production due to a rising demand in India and other countries in southeast Asia, a company release said.
Shandong Zhouyuan Seed and Nursery Co Ltd (SZSN) is also incorporated in the US through its subsidiary of the same name. It is engaged in production and marketing of seeds with high starch content for use in industrial food production.
The average wheat output in India is approximately 2.5 to 3 tons per hectare, while in China it is about five tons, SZSN President Wang Zhigang said.
India is currently importing wheat for second year in a row to augment its stock position despite the production in 2006-07 season is estimated at 74.89 million tons.
"Because of short cultivated area and lack of fertiliser, the gap in wheat demand and supply will remain in such areas in the next few years, and this is a big chance for us," Zhigang said.
The company will use new hybrid seed technology in order to realise sufficient supply, he added.
Three independent seed growers and a municipality current grow seeds in 1,400-1,750 acres of land for Zhouyuan. But the company plans to develop its own production capability on 4,250 acres.
The company quoted analysts as saying that India's import demand on wheat would possibly impel the international price to rise benefiting overseas exporters.
Shandong Zhouyuan Seed and Nursery Co Ltd would expand its wheat seed production due to a rising demand in India and other countries in southeast Asia, a company release said.
Shandong Zhouyuan Seed and Nursery Co Ltd (SZSN) is also incorporated in the US through its subsidiary of the same name. It is engaged in production and marketing of seeds with high starch content for use in industrial food production.
The average wheat output in India is approximately 2.5 to 3 tons per hectare, while in China it is about five tons, SZSN President Wang Zhigang said.
India is currently importing wheat for second year in a row to augment its stock position despite the production in 2006-07 season is estimated at 74.89 million tons.
"Because of short cultivated area and lack of fertiliser, the gap in wheat demand and supply will remain in such areas in the next few years, and this is a big chance for us," Zhigang said.
The company will use new hybrid seed technology in order to realise sufficient supply, he added.
Three independent seed growers and a municipality current grow seeds in 1,400-1,750 acres of land for Zhouyuan. But the company plans to develop its own production capability on 4,250 acres.
The company quoted analysts as saying that India's import demand on wheat would possibly impel the international price to rise benefiting overseas exporters.
Two Pak cement firms clear BIS standards check
NEW DELHI: Cement from Pakistan has finally received the ISI mark and can land in India. The Bureau of Indian Standards (BIS) has given its nod to Lucky Cement and Maple Leaf, the first two Pakistani manufacturers to obtain the certification. A third manufacturer, Pakistan Cement, is likely to get the certification by next week.
Cement from Pakistan may come at a substantial discount to the prevailing domestic prices. Consumers, mainly the builders, are hopeful that domestic prices, which have risen by nearly 45% in the past one-and-a-half years, would align itself with import prices.
Lack of BIS certification had held back the process of import of cement from across the border since April when, encouraged by the Indian government’s waiver of all duties on cement imports, several Pakistani manufacturers had evinced interest in exporting the commodity.
The biggest challenge for the exporters would be to overcome logistics bottlenecks. “We will be able to import cement into India only by September-end. The quantum of import and the mode would depend largely on the logistics,” said Lucky Cement India representative Pesi Dabdi, who runs a Jaipur-based cement distribution company, Creative Enterprises.
Mr Dabdi said the first batch of import may be no larger than 2000 tonnes, but the company would like to scale it up to 20-30,000 tonnes per month in a short period. Lucky Cement is still evaluating which mode, rail or sea, it would use for export.
“Using the sea route from Karachi to Kandla or Mumbai port would definitely be cheaper, but the mode we use would depend largely on the location of the customer,” said Mr Dabdi. He said the company is negotiating with potential customers for orders, but nothing has been finalised yet.
Maple Leaf too has a target of exporting 20-25,000 tonnes of cement per month to India, but initially the quantum may not be more than 10,000 tonnes. The company’s representative in India, S K Arora, who is the director of real estate firm Collage Group, said, “Most of the cement imported from Maple Leaf would be consumed in-house for our own construction projects.”
The initial plans are to get cement through the rail route from the company’s plant in Mianwali, 450 km from Lahore, to Amritsar via Wagah border. “But I don’t know if we have the capacity to handle such big volumes at Amritsar station. Availability of wagons and other facilities would certainly be an issue,” said Mr Arora.
The Indian cement industry has an installed capacity of 172 million tonnes and is working at a capacity utilisation of 97%. There is a demand-supply mismatch with demand growing at an estimated 10% and production at only 7% in the past four months. Pakistani cement can fill in this gap, but the actual impact on prices can be felt only after more foreign manufacturers get the BIS certification and import substantial amounts.
BIS is at present examining applications from 13 other foreign manufacturers, including 10 from Pakistan, and one each from China, Hong Kong and Bangladesh. Besides Lucky Cement (6.8 million tonnes capacity) and Maple Leaf (4 mt), only four applicants have a capacity of 2 mt or more and none of them have more than 3.25 million tonnes of capacity.
Cement from Pakistan may come at a substantial discount to the prevailing domestic prices. Consumers, mainly the builders, are hopeful that domestic prices, which have risen by nearly 45% in the past one-and-a-half years, would align itself with import prices.
Lack of BIS certification had held back the process of import of cement from across the border since April when, encouraged by the Indian government’s waiver of all duties on cement imports, several Pakistani manufacturers had evinced interest in exporting the commodity.
The biggest challenge for the exporters would be to overcome logistics bottlenecks. “We will be able to import cement into India only by September-end. The quantum of import and the mode would depend largely on the logistics,” said Lucky Cement India representative Pesi Dabdi, who runs a Jaipur-based cement distribution company, Creative Enterprises.
Mr Dabdi said the first batch of import may be no larger than 2000 tonnes, but the company would like to scale it up to 20-30,000 tonnes per month in a short period. Lucky Cement is still evaluating which mode, rail or sea, it would use for export.
“Using the sea route from Karachi to Kandla or Mumbai port would definitely be cheaper, but the mode we use would depend largely on the location of the customer,” said Mr Dabdi. He said the company is negotiating with potential customers for orders, but nothing has been finalised yet.
Maple Leaf too has a target of exporting 20-25,000 tonnes of cement per month to India, but initially the quantum may not be more than 10,000 tonnes. The company’s representative in India, S K Arora, who is the director of real estate firm Collage Group, said, “Most of the cement imported from Maple Leaf would be consumed in-house for our own construction projects.”
The initial plans are to get cement through the rail route from the company’s plant in Mianwali, 450 km from Lahore, to Amritsar via Wagah border. “But I don’t know if we have the capacity to handle such big volumes at Amritsar station. Availability of wagons and other facilities would certainly be an issue,” said Mr Arora.
The Indian cement industry has an installed capacity of 172 million tonnes and is working at a capacity utilisation of 97%. There is a demand-supply mismatch with demand growing at an estimated 10% and production at only 7% in the past four months. Pakistani cement can fill in this gap, but the actual impact on prices can be felt only after more foreign manufacturers get the BIS certification and import substantial amounts.
BIS is at present examining applications from 13 other foreign manufacturers, including 10 from Pakistan, and one each from China, Hong Kong and Bangladesh. Besides Lucky Cement (6.8 million tonnes capacity) and Maple Leaf (4 mt), only four applicants have a capacity of 2 mt or more and none of them have more than 3.25 million tonnes of capacity.
Deal with Indian firm on heart drug
The health ministry has made a deal with an Indian company to import a cheaper generic drug for patients with heart disease. Published on August 23, 2007
The ministry issued a compulsory licence in January to allow cheap versions of heart drugs to be produced in Thailand or imported from overseas.
Dr Wichai Chokevivatana, head of the compulsory licensing panel, said the Government Pharmaceutical Organisation (GPO) would import the drug clopidogrel following negotiations with Emcure Pharmaceuticals.
He said four firms had submitted proposals to the agency last week and Emcure's bid
won.
The market price for clopidogrel was around Bt70 per tablet and for hospitals Bt90-Bt150 per tablet. But Emcure had proposed only Bt1 per tablet, Wichai said.
"The GPO will import and register the drug with the Food and Drug Administration as soon as possible. The first import will be two million pills, which could save Bt138 million from the national budget. The ministry expects to provide the drug to patients within two months."
Clopidogrel, known by the trade name Plavix, is often used to treat coronary artery disease, peripheral vascular disease, and cerebrovascular disease, but is far too expensive for poor patients.
Only 20 per cent of patients could access drugs for heart disease, Wichai said.
The ministry issued a compulsory licence in January to allow cheap versions of heart drugs to be produced in Thailand or imported from overseas.
Dr Wichai Chokevivatana, head of the compulsory licensing panel, said the Government Pharmaceutical Organisation (GPO) would import the drug clopidogrel following negotiations with Emcure Pharmaceuticals.
He said four firms had submitted proposals to the agency last week and Emcure's bid
won.
The market price for clopidogrel was around Bt70 per tablet and for hospitals Bt90-Bt150 per tablet. But Emcure had proposed only Bt1 per tablet, Wichai said.
"The GPO will import and register the drug with the Food and Drug Administration as soon as possible. The first import will be two million pills, which could save Bt138 million from the national budget. The ministry expects to provide the drug to patients within two months."
Clopidogrel, known by the trade name Plavix, is often used to treat coronary artery disease, peripheral vascular disease, and cerebrovascular disease, but is far too expensive for poor patients.
Only 20 per cent of patients could access drugs for heart disease, Wichai said.
Indian Govt launches another wheat tender
India says it wants to import wheat, but will not specify how much it wants, the price it will pay or when it needs the grain delivered.
It is the third tender launched by the Indian Government this year to top up the country's reserve stocks.
India has said it will consider tenders for wheat either in bulk shipments, or smaller quantities in containers.
Analyst Lloyd George says even with a deregulated container trade for Australian growers, it is unlikely the local market will weigh in.
"I think the issue of old crop reserves in the Australian market is going to limit it, because we're in August and the shipment period, I would be thinking, is going to be prior to Australian new crop coming on board, so I think it's going to be fairly tough," he said.
It is the third tender launched by the Indian Government this year to top up the country's reserve stocks.
India has said it will consider tenders for wheat either in bulk shipments, or smaller quantities in containers.
Analyst Lloyd George says even with a deregulated container trade for Australian growers, it is unlikely the local market will weigh in.
"I think the issue of old crop reserves in the Australian market is going to limit it, because we're in August and the shipment period, I would be thinking, is going to be prior to Australian new crop coming on board, so I think it's going to be fairly tough," he said.
Mealybug threat may force import of Indian cotton
ISLAMABAD, Aug 19: The government is likely to allow subsidised import of middle staple cotton from India by land if the mealybug attack is not controlled in two to three weeks.
Informed sources said the mealybug attack was widespread and the government was finding it difficult to import the required pesticides in sufficient quantities owing to shortage in the international market.
“If we are unable to get the pesticides in about three weeks’ time, we may miss the cotton production target by 2 to 3 million bales,” a senior official told Dawn. The official said the Ministry of Food and Agriculture was reviewing the situation almost on a daily basis to ensure that the pesticide requirement was met.
He, however, said the current crop situation was satisfactory and the target of 13.2 million bales was expected to be achieved or might even be surpassed. But, he added, the next two weeks were crucial and if the problem continued the production might go down by three million bales.
In case the virus was not controlled in two weeks, the official said, the government would have to consider subsidised import of second grade cotton from India to meet the needs of the textile industry which was already facing a shortage of about three million bales.
Sources in the industry said the All Pakistan Textile Mills Association had forwarded a formal request to the federal government to allow duty- and tax-free import of second grade cotton from India. They said the government had allowed duty- and tax-free import of long staple cotton from India but the step was of no help because long staple cotton was not available in the neighbouring country.
They said import of middle staple cotton through Bandar Abbas, Iran, and Dubai was continuing through normal channels on normal tax and duty rates.
If the cotton production targets are not met in the event of non-availability of mealybug pesticides, there will be no option but to allow duty- and tax-free import of cotton from India. But by that time prices may rise, neutralising the savings from tax and duty exemptions.
The government has targeted textile exports in the range of $15-16 billion this year, against last year’s just over $12 billion.
A part of about four million bales of surplus Uzbek cotton, which is lying at Iran’s Bandar Abbas port, is currently being imported by the private sector. Recently, about 50,000 bales or 8,000 tons of middle staple cotton was imported by the private sector.
The textile industry at present is under-utilised to the extent of 30 per cent. Before the mealybug attack, the government had set a target of producing 13.2 million bales which can drop to 10-11 million bales if pesticide availability is not ensured in the next few days. Pakistan’s total cotton consumption is around 16 million bales.
Pakistan is exporting about $1.5 billion cotton yarn which is not only strengthening its competitors but also resulting in low-cost exports. The share of textile exports in the country’s overall exports accounts for about 67 per cent and the government and the industry anticipate this reaching 80 per cent in a year or so. To achieve this target, the strategy is to diversify markets and focus on Central Asian Republics, Russia and Turkey.
Informed sources said the mealybug attack was widespread and the government was finding it difficult to import the required pesticides in sufficient quantities owing to shortage in the international market.
“If we are unable to get the pesticides in about three weeks’ time, we may miss the cotton production target by 2 to 3 million bales,” a senior official told Dawn. The official said the Ministry of Food and Agriculture was reviewing the situation almost on a daily basis to ensure that the pesticide requirement was met.
He, however, said the current crop situation was satisfactory and the target of 13.2 million bales was expected to be achieved or might even be surpassed. But, he added, the next two weeks were crucial and if the problem continued the production might go down by three million bales.
In case the virus was not controlled in two weeks, the official said, the government would have to consider subsidised import of second grade cotton from India to meet the needs of the textile industry which was already facing a shortage of about three million bales.
Sources in the industry said the All Pakistan Textile Mills Association had forwarded a formal request to the federal government to allow duty- and tax-free import of second grade cotton from India. They said the government had allowed duty- and tax-free import of long staple cotton from India but the step was of no help because long staple cotton was not available in the neighbouring country.
They said import of middle staple cotton through Bandar Abbas, Iran, and Dubai was continuing through normal channels on normal tax and duty rates.
If the cotton production targets are not met in the event of non-availability of mealybug pesticides, there will be no option but to allow duty- and tax-free import of cotton from India. But by that time prices may rise, neutralising the savings from tax and duty exemptions.
The government has targeted textile exports in the range of $15-16 billion this year, against last year’s just over $12 billion.
A part of about four million bales of surplus Uzbek cotton, which is lying at Iran’s Bandar Abbas port, is currently being imported by the private sector. Recently, about 50,000 bales or 8,000 tons of middle staple cotton was imported by the private sector.
The textile industry at present is under-utilised to the extent of 30 per cent. Before the mealybug attack, the government had set a target of producing 13.2 million bales which can drop to 10-11 million bales if pesticide availability is not ensured in the next few days. Pakistan’s total cotton consumption is around 16 million bales.
Pakistan is exporting about $1.5 billion cotton yarn which is not only strengthening its competitors but also resulting in low-cost exports. The share of textile exports in the country’s overall exports accounts for about 67 per cent and the government and the industry anticipate this reaching 80 per cent in a year or so. To achieve this target, the strategy is to diversify markets and focus on Central Asian Republics, Russia and Turkey.
Indian Textile & Apparels Industry – Challenges Ahead
(openPR) - On 23 Aug 2007, the textiletreasure.com online apparels magazine quoted Mr JK Arora the leading apparels expert as saying, "The Indian textile and apparels industry is in a stronger position now than it was in the last six decades. The industry, which was growing at 3 – 4 percent during the last six decades has now accelerated to an annual growth rate of 9 – 10 percent. There is a sense of optimism in the industry and textile and apparels sector has now become a ‘sunrise’ sector".
The catalysts, which have placed the industry on this trajectory of exponential growth are a buoyant domestic economy, a substantial increase in cotton production, the conducive policy environment provided by the Government, and the expiration of the Multi Fibre Agreement (MFA) on 31 December’2004 and implementation of Agreement on Textiles and Clothing (ATC).
The buoyant Indian economy, growing at the rate of 8 percent, has resulted in higher disposable income levels. The disposable income of Indian consumers has increased steadily. The proportion of the major consuming class (population that has an annual income of more than US$ 2000) has risen from 20 percent in 1995-96 to 28 percent in 2001-02. This is expected to move up to 35 percent by 2005-06, and to 48 percent by 2009-10. This translates into a growth of 9.3 percent over the next 8 years, and will result in higher spending capacity, manifesting itself in the greater consumption of textiles and apparels.
The Indian textile and apparels industry consumes a diverse range of fibres and yarn, but is predominantly cotton based. A significant increase in cotton production during the last two – three years has increased the availability of raw cotton to the domestic textiles and apparels industry at competitive prices, providing it with a competitive edge in the global market.
The Government has also provided industry a conducive policy environment and initiated schemes, which have facilitated the growth of the industry. The Technology Mission on Cotton has increased cotton production and reduced contamination levels. The Technology Upgradation Fund Scheme (TUFS) has facilitated the installation of the state-of-the-art / near state-of-the-art technology/machinery at competitive capital cost. The rationalization of fiscal duties has provided a level playing field to all segments, resulting in the holistic growth of the industry. Besides the government’s permission to allow import of a number of textile and apparels resources in terms of trimmings, embellishments, consumables and accessories, fabrics, linings/interlinings, etc. has made the apparels export industry in India much more competitive than ever before.
Not only this, the government, of late has been giving a lot of attention to strengthen infrastructure like roads, ports, power, water, telecommunications, etc. to supplement the efforts put in by the Indian textile and apparels industry to become a surrise industry.
To provide Indian consumers with world-class quality in textile and apparels and retail services, the government has recently allowed single-brand overseas retailers to set up retail shops in India. The multi-brand overseas retailers/super markets/investors are already in India to conduct wholesale business to feed existing retailers with quality products.
Quotas or quantitative restrictions imposed by developed nations, which restrained the export growth of the Indian textiles and apparels industry for over four decades, were eliminated with effect from 01 January 2005. This has unshackled Indian textiles and apparels exports, and this is evident from the growth registered in the quota markets. Apparels exports to the USA during 2005 and 2006 increased by 34.2 and 7.08 percent respectively, while textiles exports during 2006 to the US showed and impressive 12.42 percent growth. Similarly, in Europe, apparels exports increased by 30.6 and 17.50 % respectively in 2005 and 2006, while textile exports registered 2.2 and 3.5 percent growth in the similar period respectively. The increasing trends in exports is expected to continue in the years to come.
If we look at the US and EU import statistics for apparels alone, we find that these major global players are not inclined to source exclusively from China and India is considered as the second most preferred destination for major global retailers due to its strength of vertical and horizontal integration.
The Indian government has always and is continuing to consider the role of textiles and apparels manufacturing units in India as very critical in achieving the objectives of faster and more inclusive growth, and has laid emphasis on policies aimed at creating an environment in which entrepreneurship can flourish.
The textiles and apparels industry is targeted to grow at the rate of 16 percent in value terms to reach the level of US$ 115 billion (exports US$ 55 billion; domestic market US$ 60 billion) by 2012, while the fabric production is expected to grow at the rate of 12 percent in volume terms. Apparels alone are expected to grow at the rate of 16 percent in volume terms and 21 percent in value terms, while exports are expected to grow at the rate of 22 percent in value terms,
The catalysts, which have placed the industry on this trajectory of exponential growth are a buoyant domestic economy, a substantial increase in cotton production, the conducive policy environment provided by the Government, and the expiration of the Multi Fibre Agreement (MFA) on 31 December’2004 and implementation of Agreement on Textiles and Clothing (ATC).
The buoyant Indian economy, growing at the rate of 8 percent, has resulted in higher disposable income levels. The disposable income of Indian consumers has increased steadily. The proportion of the major consuming class (population that has an annual income of more than US$ 2000) has risen from 20 percent in 1995-96 to 28 percent in 2001-02. This is expected to move up to 35 percent by 2005-06, and to 48 percent by 2009-10. This translates into a growth of 9.3 percent over the next 8 years, and will result in higher spending capacity, manifesting itself in the greater consumption of textiles and apparels.
The Indian textile and apparels industry consumes a diverse range of fibres and yarn, but is predominantly cotton based. A significant increase in cotton production during the last two – three years has increased the availability of raw cotton to the domestic textiles and apparels industry at competitive prices, providing it with a competitive edge in the global market.
The Government has also provided industry a conducive policy environment and initiated schemes, which have facilitated the growth of the industry. The Technology Mission on Cotton has increased cotton production and reduced contamination levels. The Technology Upgradation Fund Scheme (TUFS) has facilitated the installation of the state-of-the-art / near state-of-the-art technology/machinery at competitive capital cost. The rationalization of fiscal duties has provided a level playing field to all segments, resulting in the holistic growth of the industry. Besides the government’s permission to allow import of a number of textile and apparels resources in terms of trimmings, embellishments, consumables and accessories, fabrics, linings/interlinings, etc. has made the apparels export industry in India much more competitive than ever before.
Not only this, the government, of late has been giving a lot of attention to strengthen infrastructure like roads, ports, power, water, telecommunications, etc. to supplement the efforts put in by the Indian textile and apparels industry to become a surrise industry.
To provide Indian consumers with world-class quality in textile and apparels and retail services, the government has recently allowed single-brand overseas retailers to set up retail shops in India. The multi-brand overseas retailers/super markets/investors are already in India to conduct wholesale business to feed existing retailers with quality products.
Quotas or quantitative restrictions imposed by developed nations, which restrained the export growth of the Indian textiles and apparels industry for over four decades, were eliminated with effect from 01 January 2005. This has unshackled Indian textiles and apparels exports, and this is evident from the growth registered in the quota markets. Apparels exports to the USA during 2005 and 2006 increased by 34.2 and 7.08 percent respectively, while textiles exports during 2006 to the US showed and impressive 12.42 percent growth. Similarly, in Europe, apparels exports increased by 30.6 and 17.50 % respectively in 2005 and 2006, while textile exports registered 2.2 and 3.5 percent growth in the similar period respectively. The increasing trends in exports is expected to continue in the years to come.
If we look at the US and EU import statistics for apparels alone, we find that these major global players are not inclined to source exclusively from China and India is considered as the second most preferred destination for major global retailers due to its strength of vertical and horizontal integration.
The Indian government has always and is continuing to consider the role of textiles and apparels manufacturing units in India as very critical in achieving the objectives of faster and more inclusive growth, and has laid emphasis on policies aimed at creating an environment in which entrepreneurship can flourish.
The textiles and apparels industry is targeted to grow at the rate of 16 percent in value terms to reach the level of US$ 115 billion (exports US$ 55 billion; domestic market US$ 60 billion) by 2012, while the fabric production is expected to grow at the rate of 12 percent in volume terms. Apparels alone are expected to grow at the rate of 16 percent in volume terms and 21 percent in value terms, while exports are expected to grow at the rate of 22 percent in value terms,
Localitis charge singes Indian envoy
WASHINGTON: A good diplomat is someone who can tell you to go to hell in such a way that you actually look forward to the trip, it is famously said. Ronen Sen, India's ambassador to the US, evidently won't make that cut, his misconstrued "headless chicken" remark provoking the political class into packing him off to a purgatory reserved for dispensable diplomats.
But more than for his immediate faux pas, Sen has been on the hit list of his detractors for two reasons.
One is for his alleged "localitis," a diplomatic affliction that is so well known it has been featured prominently even in US foreign service chronicles. The other is his perceived closeness to the Congress party and the Gandhi family.
Localitis, also known as clientitis, is when diplomats and are perceived as being more sympathetic to the host country than to the government they serve. Many diplomats, both Indian and American, have been accused of this in the past decades.
Chester Bowles, John Kenneth Galbraith, and Daniel P.Moynihan were among the US envoys who carried this stigma (of being overly sympathetic to New Delhi), while on the Indian side, Naresh Chandra and Nani Palkhivala faced criticism for being too close to the US. All they did was promote better ties between two sides afflicted with Cold War pathology.
Diplomatic chroniclers say there is nothing in Ronen Sen's career profile that suggests he is sympathetic to the United States. If anything, he is an Indian Sovietogolist. He has served three times in Moscow, totaling 14 years, including a six-year stint as the Ambassador from 1992 to 1998. He has also been India's envoy to London, Berlin and Mexico City.
On the flip side, he worked in Rajiv Gandhi's PMO during the mid-to late 1980s when New Delhi and Washington undertook some of the most dynamic initiatives, including import of Cray super computers and GE engines for the LCA project. It was this stint that marked him as being close to the 10, Janpath.
Is that enough to stigmatize him as "pro-American," a tag that can be fatal in a polity still steeped in deep suspicion of Washington?
Hardly. If anything, Sen's American experience in pretty thin, with just one posting in San Francisco, as a junior diplomat, back in 1972.
In fact, on the day the storm over his remarks broke, Sen had told this correspondent that he was driving to Niagara Falls, which he had never visited during his stints in the US.
He eventually scrubbed the trip, hoping that the far more precipitous event in New Delhi will not drown out his career. Ambassadors have to strike a delicate balance between being friendly to their host country and loyal to their governments. According to the Association for Diplomatic Studies and Training, a Washington DC area-based NGO, Foreign Service area specialists are highly valued for their expert (and sometimes esoteric) knowledge of foreign cultures, but sometimes these same specialists come under criticism for getting too close to their subjects
"When describing attitudes and conditions that run counter to official policies, they have on occasion been charged, both within and outside the State Department, with a bias known pejoratively as localitis or clientitis," the ADST says in a paper on the foreign service.
In the US itself, it says, two groups of foreign service specialists have often been accused of localitis - "China hands" who were hounded and abused during the McCarthy era for being sympathetic to communists, and more recently, "Arabists" who have faced strong criticism from the Jewish lobby who feel they lack sufficient empathy for the state of Israel.
While localitis is often attributed to over-exposure or ideological affinity, there are occasions when personal motives and ties are raised. Most recently, Pakistan's foreign secretary Riaz Mohammed Khan is under attack in Pakistan because he is married to a serving senior US state department official.
Monday, August 6, 2007
India Inc’s import intensity of exports slides as rupee rises
Indian policymakers are facing a new dilemma. The rupee has been appreciating sharply against the dollar — it has appreciated by 11% since August last year — something they did not experience often in the past. A huge current account deficit in the US and steady capital inflows are expected to strengthen the rupee further in the coming months.
The appreciation of rupee, of course, has come as no surprise. The mounting foreign exchange reserves over the years always had the potential for a stronger rupee and it was the intervention of the central bank that kept it from a dramatic rise. But even the central bank now finds it difficult to restrict the forward march of rupee.
The question is: How will the appreciation of the rupee affect our economy? The immediate impact will be on our exports, economists argue. And if in terms of volume, exports do not suffer significantly in the short run, earnings will decline due to lower realisation in rupee terms. This is reflected in the fall in export growth in the current year. Exports have grown 18.1% in the first quarter against 28% targeted for the whole year.
Exporters attribute the dip in growth rate to the appreciating rupee and have warned that the poor realisations due to appreciation of rupee is impacting their competitiveness, forcing them to cut down on their order bookings.The strengthening of rupee, however, has a brighter side too. As imported goods become cheaper and global competition gets intensified, corporate India will be pressurised to raise productivity. This will benefit the domestic consumers as not only the imported goods will be cheaper but the domestic manufacturers too will be compelled to cut prices to retain their market shares.
But that will be in the future. For the present, Indian companies seem to suffer heavily from rupee appreciation as import intensity of exports is falling. An ET survey of 150 large companies finds that their import intensity of exports, measured as number of times imports as percentage of sales over exports as percentage of sales, has declined from an already low 0.87 in 2005-06 to 0.83 in 2006-07.
What is significant is that the fall in import intensity of exports during this period was largely due to higher shares of exports in sales and not because of rise in the share of imports in sales. That is, although the companies will lose in export earnings due to appreciation of rupee, they will not benefit the same way from imports.
The share of imports in sales has nearly stagnated at around 24% — up by only 0.6 percentage points from 23.7% in 2005-06 to 24.3% in 2006-07. The share of exports in sales at the other end has increased by more than two percentage points during this period from 27.4% to 29.5%. A stronger rupee is now feared to change the equation.
The appreciation of rupee, of course, has come as no surprise. The mounting foreign exchange reserves over the years always had the potential for a stronger rupee and it was the intervention of the central bank that kept it from a dramatic rise. But even the central bank now finds it difficult to restrict the forward march of rupee.
The question is: How will the appreciation of the rupee affect our economy? The immediate impact will be on our exports, economists argue. And if in terms of volume, exports do not suffer significantly in the short run, earnings will decline due to lower realisation in rupee terms. This is reflected in the fall in export growth in the current year. Exports have grown 18.1% in the first quarter against 28% targeted for the whole year.
Exporters attribute the dip in growth rate to the appreciating rupee and have warned that the poor realisations due to appreciation of rupee is impacting their competitiveness, forcing them to cut down on their order bookings.The strengthening of rupee, however, has a brighter side too. As imported goods become cheaper and global competition gets intensified, corporate India will be pressurised to raise productivity. This will benefit the domestic consumers as not only the imported goods will be cheaper but the domestic manufacturers too will be compelled to cut prices to retain their market shares.
But that will be in the future. For the present, Indian companies seem to suffer heavily from rupee appreciation as import intensity of exports is falling. An ET survey of 150 large companies finds that their import intensity of exports, measured as number of times imports as percentage of sales over exports as percentage of sales, has declined from an already low 0.87 in 2005-06 to 0.83 in 2006-07.
What is significant is that the fall in import intensity of exports during this period was largely due to higher shares of exports in sales and not because of rise in the share of imports in sales. That is, although the companies will lose in export earnings due to appreciation of rupee, they will not benefit the same way from imports.
The share of imports in sales has nearly stagnated at around 24% — up by only 0.6 percentage points from 23.7% in 2005-06 to 24.3% in 2006-07. The share of exports in sales at the other end has increased by more than two percentage points during this period from 27.4% to 29.5%. A stronger rupee is now feared to change the equation.
Bangladesh To Import 50,000 Tons Of Rice From India To Keep Up With Demand Levels
Dhaka, Bangladesh (AHN) - The Bangladesh government on Sunday decided to import 50,000 tons of rice from India to maintain supply and to keep pace with the demand in the country, according to officials.
The decision was made at a meeting of the Council of Advisors' Committee on Public Purchase held in Dhaka with Finance and Planning Advisor Mirza Azizul Islam in the chair.
After the meeting, the finance advisor told the reporters that the committee also gave approval to import 187,500 tons of urea fertilizer, appoint a foreign consultant for Siddhirganj power plant and purchase the aircraft for Biman Bangladesh Airlines, which is already in operation under a lease agreement.
The government has decided to import rice at this time to meet its rice procurement target, the finance advisor explained. "As we need to increase the supply of rice to the local market, the stocks should be strengthened by importing rice."
LMJ International Ltd, an Indian company, has been selected as the lowest bidder to supply rice worth US$ 18.76 million (Tk1.285 billion). The company offered $349.90 per metric ton, while two other Indian bidders offered $368.11 and $372 for the same quantity of rice, according to reports.
The decision was made at a meeting of the Council of Advisors' Committee on Public Purchase held in Dhaka with Finance and Planning Advisor Mirza Azizul Islam in the chair.
After the meeting, the finance advisor told the reporters that the committee also gave approval to import 187,500 tons of urea fertilizer, appoint a foreign consultant for Siddhirganj power plant and purchase the aircraft for Biman Bangladesh Airlines, which is already in operation under a lease agreement.
The government has decided to import rice at this time to meet its rice procurement target, the finance advisor explained. "As we need to increase the supply of rice to the local market, the stocks should be strengthened by importing rice."
LMJ International Ltd, an Indian company, has been selected as the lowest bidder to supply rice worth US$ 18.76 million (Tk1.285 billion). The company offered $349.90 per metric ton, while two other Indian bidders offered $368.11 and $372 for the same quantity of rice, according to reports.
Best possible semantic consensus
The text of the much debated 123 agreement between India and the United States that will allow for cooperation in the civilian nuclear sector between the two countries was made public on Friday (August 3).
A careful reading of the 22 pages that comprise 17 detailed articles will suggest that this document represents the best possible semantic consensus that could have been arrived at between two vibrant democracies that have been bitterly opposed on the nuclear issue for close onto 33 years — from May 1974 in the aftermath of the Indian Peaceful Nuclear Explosion (PNE) — to date.
Given the orientation of the bilateral relationship between the world’s oldest and largest democracies over the last four decades wherein ‘estrangement’ was the leitmotif of the relationship and the larger international-cum-regional strategic context in which the nuclear issue was located, it would be fair to say that this consensus over the text of the 123 agreement marks a radical and historic trajectory for both nations.
It was driven by a very clear and objective determination of the new strategic realities of the 21st century and the manner in which the two states could maximise their respective positions against the backdrop of the turbulence of globalisation impelled by relentless technological advances.
This bold departure to recast the template of the bilateral relationship was heralded by the George Bush-Manmohan Singh agreement of July 18, 2005 (J18) and in many ways, the 123 agreement’s text allows both leaders to make good their commitments to each other — and more importantly to their respective domestic constituencies.
The latter assumes great import in a vibrant democracy for the political leadership and since the nuclear issue arouses such prickly sensitivities in both countries, the shift in fiercely guarded national positions merits empathetic attention.
Much of the debate in both the US and India since J18 to August 3 demonstrates how policy makers sought to accommodate and allay the concerns expressed and square what must rank as the prickliest circle of the nuclear age since Hiroshima of 1945.
Critics on both sides are equally vehement in claiming that their leadership has ‘sold out’: in India that the right to test has been mortgaged to the US and in the US that India has been allowed to have its cake and eat it too, despite it nuclear defiance — meaning the May 1974 PNE, the obdurate refusal to sign the NPT and worse still, carrying out the May 1998 nuclear tests! Conflict resolution practitioners and negotiating strategy gurus will recognise with wry satisfaction that if both sides are equally dissatisfied and vehement in venting their ire over a deal, then it must be a good one.
India had three principal concerns since J18 and these included the right to retain the option to carry out a nuclear test if the national interest so warranted; the assurance that there would be no repeat of the Tarapur experience when the US cited domestic law and unilaterally terminated its fuel supply agreement; and the right to be able to reprocess spent fuel, which is critical for the three-stage fast breeder/thorium route that India envisages in coming years.
Section 14 of the 123 agreement dwells on the exigency of when and how the termination clause may be invoked and here it merits note that this has been placed in a detailed security context and precludes the possibility of any immediate or unconsidered executive action by the US. In short, there is no fear that punitive sanctions or immediate return of US supplied material will automatically kick in.
But the salience of a potential Indian nuclear test and its relative index in what India is about to obtain as a result of J18 begs detailed politico-strategic and techno-economic cost-benefit analysis by way of gaming or scenario building scrutiny over the next three decades. Should India prioritise the unfettered right to carry out a nuclear test at some indeterminate point in the future as the sole determinant of the national interest in August 2007?
The answer is an emphatic no. India’s abiding national interest at this point lies in seeking the removal of the technology denial regimes and the nuclear apartheid status that has been its cross to bear since May 1974. And the charge against India at the time was led by the Washington Beltway with the tacit support of all the major powers including Moscow and Paris.
In any event, a close reading of Section 14 and the other explanatory notes suggests that India will still have the right to test — if it so desires — but the US will have the right to respond as per its legislation. Here the myth must be dispelled that J18 and the current 123 agreement derived from the Hyde Act of December 2006 place additional penalties on India in the event of a future nuclear test. It may be recalled that US law going back to 1954 (which precedes J18 by 51 years) is an existential reality and an Indian test would have elicited the same US response in any case.
Section 5 of the full text of 123 agreement addresses, to my mind, the guarantees for fuel supplies and the reprocessing anxiety — though the latter will have to be negotiated separately. What is more relevant is that over the last few months it is the United States that has shown the flexibility to concur on the right to reprocess and this is not notional. Furthermore, this is not an immediate requirement for India given the nascent experimental stage of the breeder programme.
Perhaps at the end of the day, what will shape the success or stifling of the George Bush-Manmohan Singh J18 initiative is the trust factor — a nuance alluded to by the National Security Adviser M K Narayanan in a recent media interview. India and the US are yet to develop the appropriate level of trust and confidence in the ‘other’ and the received wisdom on both sides is still shackled by the inheritance of the Cold War. A new phase in the bilateral ties beckons and it will not be smooth but the text of the 123 agreement should provide the requisite foundation.
A careful reading of the 22 pages that comprise 17 detailed articles will suggest that this document represents the best possible semantic consensus that could have been arrived at between two vibrant democracies that have been bitterly opposed on the nuclear issue for close onto 33 years — from May 1974 in the aftermath of the Indian Peaceful Nuclear Explosion (PNE) — to date.
Given the orientation of the bilateral relationship between the world’s oldest and largest democracies over the last four decades wherein ‘estrangement’ was the leitmotif of the relationship and the larger international-cum-regional strategic context in which the nuclear issue was located, it would be fair to say that this consensus over the text of the 123 agreement marks a radical and historic trajectory for both nations.
It was driven by a very clear and objective determination of the new strategic realities of the 21st century and the manner in which the two states could maximise their respective positions against the backdrop of the turbulence of globalisation impelled by relentless technological advances.
This bold departure to recast the template of the bilateral relationship was heralded by the George Bush-Manmohan Singh agreement of July 18, 2005 (J18) and in many ways, the 123 agreement’s text allows both leaders to make good their commitments to each other — and more importantly to their respective domestic constituencies.
The latter assumes great import in a vibrant democracy for the political leadership and since the nuclear issue arouses such prickly sensitivities in both countries, the shift in fiercely guarded national positions merits empathetic attention.
Much of the debate in both the US and India since J18 to August 3 demonstrates how policy makers sought to accommodate and allay the concerns expressed and square what must rank as the prickliest circle of the nuclear age since Hiroshima of 1945.
Critics on both sides are equally vehement in claiming that their leadership has ‘sold out’: in India that the right to test has been mortgaged to the US and in the US that India has been allowed to have its cake and eat it too, despite it nuclear defiance — meaning the May 1974 PNE, the obdurate refusal to sign the NPT and worse still, carrying out the May 1998 nuclear tests! Conflict resolution practitioners and negotiating strategy gurus will recognise with wry satisfaction that if both sides are equally dissatisfied and vehement in venting their ire over a deal, then it must be a good one.
India had three principal concerns since J18 and these included the right to retain the option to carry out a nuclear test if the national interest so warranted; the assurance that there would be no repeat of the Tarapur experience when the US cited domestic law and unilaterally terminated its fuel supply agreement; and the right to be able to reprocess spent fuel, which is critical for the three-stage fast breeder/thorium route that India envisages in coming years.
Section 14 of the 123 agreement dwells on the exigency of when and how the termination clause may be invoked and here it merits note that this has been placed in a detailed security context and precludes the possibility of any immediate or unconsidered executive action by the US. In short, there is no fear that punitive sanctions or immediate return of US supplied material will automatically kick in.
But the salience of a potential Indian nuclear test and its relative index in what India is about to obtain as a result of J18 begs detailed politico-strategic and techno-economic cost-benefit analysis by way of gaming or scenario building scrutiny over the next three decades. Should India prioritise the unfettered right to carry out a nuclear test at some indeterminate point in the future as the sole determinant of the national interest in August 2007?
The answer is an emphatic no. India’s abiding national interest at this point lies in seeking the removal of the technology denial regimes and the nuclear apartheid status that has been its cross to bear since May 1974. And the charge against India at the time was led by the Washington Beltway with the tacit support of all the major powers including Moscow and Paris.
In any event, a close reading of Section 14 and the other explanatory notes suggests that India will still have the right to test — if it so desires — but the US will have the right to respond as per its legislation. Here the myth must be dispelled that J18 and the current 123 agreement derived from the Hyde Act of December 2006 place additional penalties on India in the event of a future nuclear test. It may be recalled that US law going back to 1954 (which precedes J18 by 51 years) is an existential reality and an Indian test would have elicited the same US response in any case.
Section 5 of the full text of 123 agreement addresses, to my mind, the guarantees for fuel supplies and the reprocessing anxiety — though the latter will have to be negotiated separately. What is more relevant is that over the last few months it is the United States that has shown the flexibility to concur on the right to reprocess and this is not notional. Furthermore, this is not an immediate requirement for India given the nascent experimental stage of the breeder programme.
Perhaps at the end of the day, what will shape the success or stifling of the George Bush-Manmohan Singh J18 initiative is the trust factor — a nuance alluded to by the National Security Adviser M K Narayanan in a recent media interview. India and the US are yet to develop the appropriate level of trust and confidence in the ‘other’ and the received wisdom on both sides is still shackled by the inheritance of the Cold War. A new phase in the bilateral ties beckons and it will not be smooth but the text of the 123 agreement should provide the requisite foundation.
No wheat exports to India: Pak
NEW DELHI: Stating there was no change in its policy of ban on wheat exports, Pakistan on Friday said it would not be possible to sell the foodgrain to India.
"We only have a marginal surplus of wheat and we will utilise it as strategic reserves," visiting Pakistan Commerce Secretary Syed Asif Shah told reporters here.
Shah added that the ban on wheat exports not only applied to India but also to other countries. An upward spiral in domestic wheat prices had prompted Pakistan to ban exports of the foodgrain on May 23.
Earlier this year, Pakistan had lifted a two-and-a-half year ban on wheat exports due to high production and had allowed sale of over one million tonnes of the foodgrain overseas, including India.
Pakistan's wheat output is estimated to be over 23 million tonnes against last year's 21.7 million tonnes. Initially, Pakistan exporters contracted to sell about five lakh tonnes of wheat and a large consignment was sent to India.
Pakistan's decision to ban wheat exports came as a set-back to Indian traders as they are deprived of an opportunity to import at a cheaper price.
Besides, transportation costs, India would also have saved on time by importing wheat from the neghbouring country via Lahore and Karachi to Delhi and Mumbai through the rail and sea routes.
Currently, India is importing wheat from Argentina, Canada and Ukraine. It recently contracted to import 5.11 lakh tonnes of the foodgrain to augment buffer stocks.
In reply to another query, Shah said Pakistan would not require to import sugar from India as it had enough stocks.
"We only have a marginal surplus of wheat and we will utilise it as strategic reserves," visiting Pakistan Commerce Secretary Syed Asif Shah told reporters here.
Shah added that the ban on wheat exports not only applied to India but also to other countries. An upward spiral in domestic wheat prices had prompted Pakistan to ban exports of the foodgrain on May 23.
Earlier this year, Pakistan had lifted a two-and-a-half year ban on wheat exports due to high production and had allowed sale of over one million tonnes of the foodgrain overseas, including India.
Pakistan's wheat output is estimated to be over 23 million tonnes against last year's 21.7 million tonnes. Initially, Pakistan exporters contracted to sell about five lakh tonnes of wheat and a large consignment was sent to India.
Pakistan's decision to ban wheat exports came as a set-back to Indian traders as they are deprived of an opportunity to import at a cheaper price.
Besides, transportation costs, India would also have saved on time by importing wheat from the neghbouring country via Lahore and Karachi to Delhi and Mumbai through the rail and sea routes.
Currently, India is importing wheat from Argentina, Canada and Ukraine. It recently contracted to import 5.11 lakh tonnes of the foodgrain to augment buffer stocks.
In reply to another query, Shah said Pakistan would not require to import sugar from India as it had enough stocks.
Cement firms merger will create regional giant to fend off Asian import competition
The Kenya government has received a proposal for the merger of the two largest cement producers in Kenya, Bamburi Cement Ltd and East Africa Portland Cement Ltd, marking the beginning of what could be the most comprehensive restructuring of the cement industry in Kenya in years, with ramifications likely to be felt throughout East Africa.
If the proposal for the merger — which, incidentally, is supported by East Africa Portland Cement — is approved, French cement conglomerate Lafarge, the most influential player in the region with plants in Kenya, Uganda and Tanzania, will have a chance to consolidate its interest in the region.
The new development points to a thawing of relations between Lafarge and the government, which until fairly recently was still pressing the French conglomerate to relinquish part of its stake in East Africa Portland, arguing that its involvement in the shareholding of the three major producers in Kenya constituted a conflict of interest.
Lafarge has a 41 per cent stake in East Africa Portland and a 17 per cent stake in Athi River Mining Ltd even as it retains a controlling stake in Bamburi — allowing it to enjoy a strategically dominant position in the cement industry in Kenya with representation in the boards of all three cement manufacturers.
In Uganda, the French company has a controlling stake in Hima Cement Ltd, while in Tanzania, one of the major cement producers, Mbeya Cement Ltd, is a subsidiary.
The merger is being supported on the grounds that the two big producers have to merge to create one strong East African champion capable of fending off competition from cement exporters from Southeast Asia, India, the Middle East and Egypt.
East Africa currently remains a high-cost cement producer, partly due to high electricity prices, exorbitant freight costs, high fuel costs and inefficient railway systems, but mainly because the market has for many years been sheltered from competition by high trade barriers.
Although cement companies have over the years been making profits, the industry has been protected by both a 25 per cent import duty plus a 30 per cent suspended duty.
The merger proposal is based on the grounds that this level of protection is unlikely to be sustained in the near future. Under the Customs Union of the East African Community, these duties must be reduced to zero by the year 2010.
Indeed, cement manuf-acturing in the region operate with high fixed costs that are linked to the relatively small sizes of cement plants in the region, thus compounding the problem of high production costs.
The consequence has been ever increasing consumer prices of cement in the region, the impact of which has been that per capita cement consumption in East Africa is one of the lowest in Africa.
According to industry estimates, Kenya’s annual per capita consumption stands at 54 kilogrammes; in Tanzania, it is 37kg in Uganda 32kg. South Africa’s per capita cement consumption is estimated at 200kg.
Clearly, the regional cement market is ripe for consolidation. What is surprising is that even in the face of these grim statistics, recent developments show that the cement industry in East Africa is progressively moving away from consolidating.
Instead of consolidating, nearly all individual cement producers in East Africa are acting as if oblivious to the increasingly hostile international environment they have to operate in.
Each of the major players is currently involved in a race to increase its own market share, spending millions of dollars in costly capacity expansion programmes.
In Kenya, medium producer Athi River Mining Ltd has only recently commissioned an additional kiln in Mombasa. In Uganda, Bamburi is progressing with doubling of the capacity of its Hima plant, while Tororo Cement is moving into the Kenya market with plans to erect a clinker plant in Mombasa and a grinding station in Nairobi.
In Kenya, East Africa Portland is spending millions of dollars to enhance its cement production output, while Bamburi is planning a multimillion dollar greenfield plant.
Yet it is clear that even after the completion of the new plants and facilities, the capacities of cement producers in East Africa will still remain small and comparatively inefficient compared with the big exporting facilities of Southeast Asia.
Several other factors are likely to conspire to keep cement production costs high in the near future while eroding the industry’s position vis a vis imports.
First, it is now estimated that ocean freight rates — which are currently at an all-time high, thus providing artificial protection — will drop by $10-15 in the next five years.
Secondly, with Kenya aggressively modernising its Mombasa port and Tanzania developing its Tanga Port facility to include cement import terminals, inefficiencies and delays in East African major ports will no longer provide the local cement producers with the artificial protection they have been enjoying.
Thirdly, all indications are that the three East African economies of Kenya, Uganda and Tanzania are entering a regime of consistently higher power tariffs.
Fourth, industry experts say that big new low-cost producers from the Middle East are planning a new offensive in the East Africa market very soon. They cite the case of Saudi Arabia, which alone is in the advanced stages of completing 18 cement factories currently under construction.
According to industry estimates, the cement plants in East Africa will have to reduce their manufacturing costs by at least $20 per tonne to survive competition from low-cost producers from the Middle East.
This will require production plants to reach a critical size and streamline the location of their manufacturing plants to minimise logistics — the type of restructuring that is only possible if the existing businesses merge.
The current projections are that the merger of Bamburi and Portland Cement will lead to an entity with a market share of 55 per cent in East Africa — especially after Lafarge’s stake in Mbeya Cement becomes part of the merged regional operation.
Industry sources also believe that the merged company will have the financial and strategic muscle to reach into other inland markets including the Democratic Republic of Congo, Rwanda, Burundi and Southern Sudan.
Proponents of the merger also say that with Bamburi’s sound financial standing in the Kenyan capital markets and ability to raise funds, a merger with East Africa Portland can be achieved at a very low cost and without compromising the interests of the government.
Indeed, Bamburi remains the best candidate for the merger with Portland, because no third party can provide the same synergies, especially considering that the respective production facilities of Portland and Bamburi fit into each other as a result of the tight grid of cement facilities in Mombasa, Nairobi, and Uganda.
How is the merger to be effected? Five proposals have been advanced:
First, allow the current shareholders of East African Portland wishing to exit to receive sale proceeds either in cash or shares.
Second, integrate Lafarge’s stake in Mbeya into the new company.
Third, offer a sales premium by maximising the assessed value of East African Portland through the combination of its current value with a projected value generated by the potential synergies with Bamburi.
Fourth, maintain or increase the local shareholding stake in the merged company.
Finally, consider cross listing of the new company on the three East African stock exchanges.
If the proposal for the merger — which, incidentally, is supported by East Africa Portland Cement — is approved, French cement conglomerate Lafarge, the most influential player in the region with plants in Kenya, Uganda and Tanzania, will have a chance to consolidate its interest in the region.
The new development points to a thawing of relations between Lafarge and the government, which until fairly recently was still pressing the French conglomerate to relinquish part of its stake in East Africa Portland, arguing that its involvement in the shareholding of the three major producers in Kenya constituted a conflict of interest.
Lafarge has a 41 per cent stake in East Africa Portland and a 17 per cent stake in Athi River Mining Ltd even as it retains a controlling stake in Bamburi — allowing it to enjoy a strategically dominant position in the cement industry in Kenya with representation in the boards of all three cement manufacturers.
In Uganda, the French company has a controlling stake in Hima Cement Ltd, while in Tanzania, one of the major cement producers, Mbeya Cement Ltd, is a subsidiary.
The merger is being supported on the grounds that the two big producers have to merge to create one strong East African champion capable of fending off competition from cement exporters from Southeast Asia, India, the Middle East and Egypt.
East Africa currently remains a high-cost cement producer, partly due to high electricity prices, exorbitant freight costs, high fuel costs and inefficient railway systems, but mainly because the market has for many years been sheltered from competition by high trade barriers.
Although cement companies have over the years been making profits, the industry has been protected by both a 25 per cent import duty plus a 30 per cent suspended duty.
The merger proposal is based on the grounds that this level of protection is unlikely to be sustained in the near future. Under the Customs Union of the East African Community, these duties must be reduced to zero by the year 2010.
Indeed, cement manuf-acturing in the region operate with high fixed costs that are linked to the relatively small sizes of cement plants in the region, thus compounding the problem of high production costs.
The consequence has been ever increasing consumer prices of cement in the region, the impact of which has been that per capita cement consumption in East Africa is one of the lowest in Africa.
According to industry estimates, Kenya’s annual per capita consumption stands at 54 kilogrammes; in Tanzania, it is 37kg in Uganda 32kg. South Africa’s per capita cement consumption is estimated at 200kg.
Clearly, the regional cement market is ripe for consolidation. What is surprising is that even in the face of these grim statistics, recent developments show that the cement industry in East Africa is progressively moving away from consolidating.
Instead of consolidating, nearly all individual cement producers in East Africa are acting as if oblivious to the increasingly hostile international environment they have to operate in.
Each of the major players is currently involved in a race to increase its own market share, spending millions of dollars in costly capacity expansion programmes.
In Kenya, medium producer Athi River Mining Ltd has only recently commissioned an additional kiln in Mombasa. In Uganda, Bamburi is progressing with doubling of the capacity of its Hima plant, while Tororo Cement is moving into the Kenya market with plans to erect a clinker plant in Mombasa and a grinding station in Nairobi.
In Kenya, East Africa Portland is spending millions of dollars to enhance its cement production output, while Bamburi is planning a multimillion dollar greenfield plant.
Yet it is clear that even after the completion of the new plants and facilities, the capacities of cement producers in East Africa will still remain small and comparatively inefficient compared with the big exporting facilities of Southeast Asia.
Several other factors are likely to conspire to keep cement production costs high in the near future while eroding the industry’s position vis a vis imports.
First, it is now estimated that ocean freight rates — which are currently at an all-time high, thus providing artificial protection — will drop by $10-15 in the next five years.
Secondly, with Kenya aggressively modernising its Mombasa port and Tanzania developing its Tanga Port facility to include cement import terminals, inefficiencies and delays in East African major ports will no longer provide the local cement producers with the artificial protection they have been enjoying.
Thirdly, all indications are that the three East African economies of Kenya, Uganda and Tanzania are entering a regime of consistently higher power tariffs.
Fourth, industry experts say that big new low-cost producers from the Middle East are planning a new offensive in the East Africa market very soon. They cite the case of Saudi Arabia, which alone is in the advanced stages of completing 18 cement factories currently under construction.
According to industry estimates, the cement plants in East Africa will have to reduce their manufacturing costs by at least $20 per tonne to survive competition from low-cost producers from the Middle East.
This will require production plants to reach a critical size and streamline the location of their manufacturing plants to minimise logistics — the type of restructuring that is only possible if the existing businesses merge.
The current projections are that the merger of Bamburi and Portland Cement will lead to an entity with a market share of 55 per cent in East Africa — especially after Lafarge’s stake in Mbeya Cement becomes part of the merged regional operation.
Industry sources also believe that the merged company will have the financial and strategic muscle to reach into other inland markets including the Democratic Republic of Congo, Rwanda, Burundi and Southern Sudan.
Proponents of the merger also say that with Bamburi’s sound financial standing in the Kenyan capital markets and ability to raise funds, a merger with East Africa Portland can be achieved at a very low cost and without compromising the interests of the government.
Indeed, Bamburi remains the best candidate for the merger with Portland, because no third party can provide the same synergies, especially considering that the respective production facilities of Portland and Bamburi fit into each other as a result of the tight grid of cement facilities in Mombasa, Nairobi, and Uganda.
How is the merger to be effected? Five proposals have been advanced:
First, allow the current shareholders of East African Portland wishing to exit to receive sale proceeds either in cash or shares.
Second, integrate Lafarge’s stake in Mbeya into the new company.
Third, offer a sales premium by maximising the assessed value of East African Portland through the combination of its current value with a projected value generated by the potential synergies with Bamburi.
Fourth, maintain or increase the local shareholding stake in the merged company.
Finally, consider cross listing of the new company on the three East African stock exchanges.
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