Wednesday, May 14, 2008

India’s zero import duty ruins Nepal’s ghee industry

Kathmandu, May 13 (IANS) Nepal’s ghee industry, largely dependent on its giant neighbour India for its market, is on the verge of closure after the Indian government slashed the import duty on ingredients and enabled its own industry to reduce prices. Several manufacturers in Nepal have already gone out of business while the remaining 16 are frantically searching for other options.

The crisis was triggered after India reduced import duty on palm oil, soybean and other oils used to manufacture vegetable ghee in a bid to curb inflation.

The move boosted the Indian ghee industry, helping it to reduce prices.

“In Nepal, we, on the other hand, are handicapped by several taxes,” said Atmaram Murarka, immediate past president of the Nepal Gheu Tel Utpadak Sangh, the umbrella association for the industry in Nepal.

Nepali manufacturers are levied a four percent export tax, nearly two percent local taxes as well as VAT, which, though refundable, is returned after more than a year.

In addition, they also have to shoulder transport costs to send their product to India, which adds about six percent more to the price, making Nepali ghee dearer than the Indian product by nearly Rs.18 per kg.

India allows Nepal to export 100,000 metric tonnes of ghee per year. However, this year, the Nepali despatch is less than 10,000 metric tonnes.

“We are asking Nepal to request India to scrap the state quota system,” said Murarka. “It’s unreasonable as well as superfluous now that India has done away with import duty on oils.”

Nepali ghee finds a responsive market in the neighbouring Indian states of West Bengal, Bihar, Jharkhand, and Uttar Pradesh with customers also in Rajasthan and Chhattisgarh. The transport cost is also not too high.

But India has a quota for different states.

“It is absurd to fix a quota for states like Jammu and Kashmir or Gujarat,” said Murarka. “There’s not much consumption of ghee in these states and given the distance, the transport costs are astronomical.”

The association is also lobbying for an end to the dealer system.

India has appointed its State Trading Corporation to deal with the Nepali sellers and for each kg that is sold, manufacturers have to pay an additional Rs.1.50 per kg, which adds to the cost.

“We are asking to be able to sell directly,” Murarka said. “We don’t blame the Indian government for the policies it has drawn up to protect its own interests but they affect us badly.”

Only about 15-20 percent of the ghee manufactured by the Nepali companies is consumed domestically; the rest is exported to India.

Nepali manufacturers point out that both India and Nepal are losing revenue as due to the disparity in price, ghee from India is being smuggled to Nepal across the porous border, flooding the Himalayan nation’s border towns.

At present, none of the factories in Nepal are manufacturing to their optimum capacity and a frantic search is on to look for other markets to switch over to the making of other edible oils.

However, Murarka says the industry can be saved if India scraps the state-wise quota and stops involving the STC while the Nepal government scraps export and customs duty and reduces VAT.

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Rupee at 13-month low as oil, slowdown weigh

MUMBAI: Rupee dropped to a 13-month low on Tuesday, weighed down by concerns a slowing economy would result in less foreign inflows while uncertainty about global oil prices prompted refiners to buy dollars.

The partially convertible rupee ended at 42.10/11 per dollar, off an intraday trough of 42.2175, its lowest since mid-April 2007. It had closed at 42.05/06 on Monday.

"There is oil demand, importer demand and exporters are not selling," said Agam Gupta, head of forex trading at Standard Chartered.

Oil, country's biggest import, traded above $124 a barrel, after touching a record of $126.40 on Monday. High global oil prices raise the risk of widening India's trade deficit and putting downward pressure on the rupee.

India's trade deficit had widened 35.5 per cent to $80.4 billion in the fiscal year ended March, largely due to soaring oil prices.

Dealers said that weak factory data this week also raised worries of a slowdown in Asia's third-largest economy, reinforcing expectations the rupee may weaken further in the coming weeks.

Industrial output grew 3.0 percent in March from a year earlier, its weakest growth in six years as high interest rates squeezed demand for consumer goods, data showed on Monday.

Citigroup expects growth to slow to 7.7 per cent in the fiscal year 2008/09, down from a government estimate of 8.7 percent for 2007/08.

The risk of a slowdown has raised concerns that foreigners may not be very keen to invest in Indian stocks, weakening a key support for the rupee.

The stock market has fallen about 17 per cent in 2008. Foreign funds have been net sellers of about $3 billion of stocks this year, a sharp turnaround from record buying of $17.4 billion in 2007.

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Re falls the most against greenback

After witnessing a strong rupee for most of FY08, this financial year has begun on a rather weak note for the currency markets. The rupee has ended up being the worse performing currency against the dollar among emerging market economies since March this year. It fell 7% against the greenback since March 31, while the Chinese yuan has remained almost flat against the dollar during the same period.

The Korean won, was the next worse performer as it weakened 5% against the dollar in the same period. Interestingly, many Latin American currencies like the Argentine peso and the Brazilian real have strengthened against the dollar. Though this trend may bring in some cheer for exporters, it may not spell good news for the country’s import bill, which is hitting the roof on account of soaring oil prices.

At the macro-level, the apparent reason is the soaring global commodity, food and crude prices. Though India is not a major food importer, it relies heavily on oil imports which account for more than 20% of the country’s import bill. The consumers are largely insulated from global crude oil price rise as the government steps in to subsidise the final price. But there is little that the government can do to curtail the country’s import bill at such times.

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Monday, May 5, 2008

Indian pharma may export to Philippines

NEW DELHI: Crucial patent law reforms in Philippines may open up a goldmine of opportunity for India's generic pharma industry to export medicines for treating deadly diseases such as HIV and cancer. Domestic companies including Cipla, Natco Pharma and Strides Arcolab are already exporting anti-HIV drugs to Africa and other countries.

More importantly, these reforms strengthen the case of India's Patent Act, particularly the 'often attacked' provision Section 3(d), which prohibits patenting of known drugs.

Experts say that India's Patent Act has inspired lawmakers in Philippines to ratify new legislation 'Universally Accessible Cheaper and Quality Medicines Act of 2008'. Thanks to this new bill, essential drug prices in the Philippines are expected to go down, and become affordable. The bill aims to increase access to low cost generic medicines.

In developing countries like Thailand, China and Philippines, patents are granted far more widely than in India, heavily restricting local production of affordable generics. Widespread patenting has meant that patients are not able to access affordable generic versions of essential medicines, industry experts say.

The law seeks to prohibit the grant of new patents based only on newly-discovered uses of a known drug; allow early registration of generic versions of patented medicines prior to patent expiration; and allow government to use generic versions of patented drugs when public interest is at stake. The government will also have the power to impose price ceilings on essential drugs, and allow import of expensive drugs if it is found that another country is selling them at a lower price.

"A case in point is Co-trimoxazole an essential drug commonly used for HIV to prevent infections. The drug patented by Roche costs 15.55 pesos (Rs 14) a tablet in the Philippines. The same generic drug costs .69 Philippine pesos (.63 paise) a tablet in India," says an Oxfam official, adding that essential medicines are unaffordable in the absence of generic competition. Another drug Ciprofloxacin costs about Rs.75 in Philippines whereas it costs less than Rs.5 in India.

So, Philippines is amending its Intellectual Property Code to include a provision similar to section 3(d) of India's patent law. This will prevent companies from obtaining patents for drug that are not really new, to extend their monopolies on drugs as long as possible. In 2005, when India ushered in the new patent regime under WTO, it tried to find a balance between its international obligations to grant product patents and the need to make drugs as affordable as possible for patients and the developing world.

So, section 3(d) was introduced, which restricts companies from obtaining patents in India for medicines that are not actual inventions, but slightly improved formulations of existing medicines. "There is a clear message coming from lawmakers in India and the Philippines; fewer patents result in stronger generic competition, which is important for developing countries to increase access to affordable medicines", Shalimar Vatan of Oxfam said in a statement.

The bill also includes a "nondiscriminatory clause" which requires drug stores to carry competing products so that large firms cannot intimidate pharmacies into only carrying their products.

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Pak basmati export floor price higher than India

NEW DELHI: Taking a leaf out of India’s book, Pakistan has decided to impose a minimum export price (MEP) of $1,500/tonne on fine quality basmati. As there is no export tax, the entire gain from Islamabad’s new price table will be pocketed by private exporters. That has further miffed Indian rice companies, who are already peeved at having to share their profits with the government through a new export tax.

According to a circular issued by the Rice Exporters’ Association of Pakistan, super basmati will have an MEP of $1,500/tonne, basmati $1,300/tonne, long grain rice $1,000/tonne and irri-6 $750/tonne. There will be no ban or export tax on rice.

India last week imposed an export tax of $200/tonne on basmati after reducing the MEP to $1,000/tonne from $,1200/tonne. The move was essential to partly recover the shortfall in government revenue after import duties were reduced to zero on several big-ticket items, including edible oils.

Indian basmati exporters had lobbied for an increase in MEP, with the export tax loaded on top as an extra. That would have ensured ample profits for them in a short-supplied market, where the foreign buyer would have been forced to also pay export tax. “We wanted an MEP that is $400/tonne above the Thai price for 25% broken rice,’’ said an industry player.

Since that proposal did not cut ice with the government, Indian exporters are busy re-negotiating their contracts once again to factor in the export tax. “At least the contracts already registered with the Agricultural and Processed Food Products Export Development Authority (Apeda) should be allowed to despatch. How many times can one re-work the same contract,’’ he added.

Though exporters say their foreign buyers would be unforgiving and Indian farmers would lose out on a profitable market next year, the problem may not reach such epic proportions. While older contracts are certainly facing rough weather, new contracts are unlikely to be problematic. “Some confusion will be there, given evolving government policy. But now that the policy is fixed, things should settle down. It’s a seller’s market. Indian exporters know they are sitting on a pot of gold. This is the time for India’s luxury food item to take pride in helping re-fill the exchequer,” a market watcher said.

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Thursday, May 1, 2008

Sino-India border trade at Nathu La postponed

GANGTOK: The annual Sino-India border trade at Nathu La, which was to be reopened for the traders of the two countries today, has been postponed following the Union Commerce ministry's communique to the Sikkim government authorities, official sources said here.

We have received a fax message from the Union Commerce ministry late last evening informing about the postponement of the re-opening of the border trade at Nathu La, the District Collector (East) Vishal Chauhan said.

The re-opening of annual trade at Nathu La may take place on May 19 next, he said.

The district administration would continue with the processing of the applications of the Indian traders for issuance of the travel and security passes to them in order to enable them to take part in the border trade this year, Chauhan said.


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