Guar exports from India seen surging as price slump spurs demand

New Delhi : A record plunge in the prices of guar gum, a thickening agent used for oil and gas extraction, may boost exports from India as demand revives among US drilling companies and European food processors.

Shipments may surge as much as 50% to 500,000 metric tons in the year that began on 1 April from 333,000 tons a year earlier, said Rajesh Kedia, director at Jai Bharat Gum & Chemicals Ltd., India’s third-largest exporter.

Shipments increased about 30% to about 210,000 tons in the five months through August, he said.Prices slumped after India, the world’s largest producer, banned futures trading in March 2012 to curb speculation and record rates cut demand from users. Rising supplies may further pressure prices, lowering costs for users Halliburton Co. and Baker Hughes Inc. Guar prices may continue to fall, Mark McCollum, Halliburton’s chief financial officer said 19 September.

The importers will definitely buy more as prices are attractive, Chowda Reddy, a senior manager at Inditrade Derivatives and Commodities Ltd., said in a phone interview from Hyderabad. Demand will increase.Guar gum futures slumped more than 50% since 15 May, when the Indian exchanges restarted trading after a 14-month ban.
The regulator suspended trading in March 2012 after prices rallied more than nine fold in one year to Rs.95,920 ($1,527) per 100 kilograms (220 pounds) on the National Commodity & Derivatives Exchange Ltd. in Mumbai.

Production is seen exceeding demand for a second year, Kedia said in a phone interview from Bhiwani in Rajasthan. Processors need 1.8 million tons of guar seeds to meet export demand of 500,000 tons of guar gum, he said. Seed production in Rajasthan, Gujarat and Haryana states, which together account for more than 99% of India’s harvest, is estimated to drop to 12% to 2.15 million tons in the year started July 1 from a year earlier, government data showed.

The erratic rains and long dry spell in western parts of Rajasthan were responsible for the lower production, said J.S. Sandhu, a joint director in the state’s agriculture department. Inventories of about 800,000 tons of guar seeds will make up more any shortfall in output, Kedia said. India accounts for more than 70% of the global output of guar, which means cow food in Hindi, according to the Multi Commodity Exchange of India Ltd. The seed is also grown in Pakistan and the US
Fracking Guar gum is used in the pressure-pumping technique known as fracking, which blasts water mixed with sand and chemicals underground to free trapped hydrocarbons from shale formations.

It is made into a thickening gel used to carry sand down a well and into the cracks created from fracturing. It is also used as an ingredient in food emulsifiers, additives and thickeners. Guar gum for delivery in December fell 0.6% to 14,620 rupees per 100 kilograms in Mumbai on Thursday. Some of the drilling companies, which began using alternative products to guar gum after the price surge last year, may return to the commodity as availability is assured at lower prices, Kedia said.
If prices continue to fall, there may be a negative impact on guar crop next year, Kedia said. Farmers are disappointed that guar prices have declined below their expectation.

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New system may cut export customs clearance to few hours: Chidambaram

Finance Minister P Chidambaram today expressed hope that the time taken for customs clearance of export cargo will come down to a few hours after implementing a risk management system.


"I sincerely hope that with the introduction of RMS in exports, the dwell time which now ranges from 1.6 days to 3.68 days will be brought down to a few hours," Chidambaram said after launching the all-India Risk Management System (RMS) for exports.
India started using the RMS for imports in December 2005 and it has helped to bring in additional revenue of Rs 2,211 crore, Chidambaram added. It has also reduced the dwell time, or the duration for which cargo remains in transit storage while awaiting clearance, for incoming shipments.

"The revenue department claims that the dwell time for imports has come down drastically after launch of RMS in imports. Likewise, RMS in exports is intended to bring down the dwell time so that the cargo meant for exports moves up quickly, leaves the shores of India towards its ultimate destination," Chidambaram said.

The time currently taken for customs clearance of export cargo in Mumbai is 1.6 days, while at the Inland Container Depot in Delhi it is 3.68 days.

Chidambaram said the RMS is based on trust and is part of international co-operation efforts on trade-related issues. The facility will enable low-risk consignments to be cleared based on self-assessment declarations by exporters.

By expediting the clearance of compliant export cargo, the system will contribute to lower dwell time, besides reducing transaction costs and making businesses internationally competitive.

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India's imports gained while exports grew negligibly from FTAs: ASSOCHAM study

In the aftermath of signing 15 regional and bilateral free trade agreements (FTAs), while India's imports from these countries and regions increased significantly but our exports to these partner countries either stagnated or registered minimal growth, according to a just-concluded study undertaken by apex industry body The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

India has signed as many as 15 FTAs including preferential trade pacts, while 19 are under negotiations and eight are in the pipeline but India is still grappling with slow growth of exports and sluggish foreign direct investment (FDI) flows from its FTA partners, said Mr D.S. Rawat, secretary general of ASSOCHAM.

These engagements have achieved limited results in terms of increasing trade volumes with member countries and thus main objective of these market opening pacts is only partially being met, said Mr Rawat. There is an urgent need for the government to revisit its strategy of FTAs, bring greater transparency and involve more effective administrative process in their design and implementation to make FTAs more beneficial for India.

Out of the seven major trading partners viz., ASEAN (Association of South-East Asian Nations), Indonesia, Japan, Malaysia, Singapore, South Korea and Sri Lanka with whom India has operationalised FTAs, it has trade surplus with only Sri Lanka and Singapore, highlighted the study prepared by the ASSOCHAM Economic Research Bureau (AERB).

Even on the investment front these free trade pacts have not given any extra edge to India so far as during April 2000-June 2013, India received FDI worth $1.25 billion (bn) and $14.75 bn from South Korea and Japan respectively and this year during April-June, India attracted only $224 million worth FDI from Japan while the figure was $2.23 bn in 2012-13 and $2.97 bn in 2011-12.

Considering the negative impact of these agreements on India's manufacturing sector, ASSOCHAM has suggested that trade agreements should be 'self-regulatory' to evade scope of 'safeguard measures' and the advanced partners must not be allowed to salvage Surplus capacities through exports and exploiting concessional duty rates under trade agreements.

Besides, it should be seen that trade agreements do not become a means to fill the country's short-term supply-deficit through exports made at concessional duty rates as it adds an anti-competitive element vis-vis imports from other countries. Therefore, it needs to be complemented with Specific & Time-bound commitment for inflow of Investment, otherwise the purpose of a Trade Agreement gets defeated, highlighted the ASSOCHAM study.

Considering that India's negotiations for comprehensive FTA with European Union (EU) are at an advance stage, ASSOCHAM has suggested the Ministry of Commerce and Industry to from a special team of experts to negotiate FTAs, besides the government should organize FTA outreach programmes to create awareness amid various stakeholders.

As the feasibility/joint studies conducted by the government before commencing talks for any FTA form the basis of negotiations, ASSOCHAM has also suggested for broadening the base of such studies and inviting participation from various stakeholders like academicians, representatives of the marginal, small and medium enterprises (MSMEs) and state government officials. Besides, Indian embassies in these countries should also be engaged to gather sensitive information while conducting such studies.

Other significant points suggested by ASSOCHAM include - constant updation of publically accessible information, consultation with governments at state level before finalizing the pacts, emphasis should be laid on sectors lucrative for domestic players and tariff rates of specific sectors where Indian traders can penetrate aggressively must be looked at.

So far, India has concluded 10 Free Trade Agreements, 5 Limited scope Preferential Trade Agreements and is in the process of negotiating or expanding 17 more Agreements. Besides, at least 9 more proposals for FTAs are under consideration and when completed, these Agreements would cover over 100 countries spread across 5 continents.

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Exports at 2-year high of 12.47%, trade gap widens

New Delhi : Recovery in global markets pushed the country’s exports to a two year high of 13.47% to $27.2 bn in October even as trade deficit worsened on account of rise in gold imports.

Commerce Secretary S R Rao said improvement in western markets have helped in pushing the exports. “Exports have shown a significant increase and imports fell significantly…All the regions are doing well. We see no concerns. Only South Asia and Latin America are marginally low,” Rao added.

In April-October, exports grew by 6.32% to $179.38 bn, while imports during the period contracted by 3.8% to $270.06 bn. Rao expressed confidence that the country would achieve the $325 bn target for the current fiscal.

“All the major sectors (engineering, textiles and gems and jewellery) having significant contribution have shown a positive growth trend,” he added. Engineering exports grew by 36% to $5.6 bn in October.
Rao said that gold and silver imports in October grew due to the clearing of air on a RBI norm for gold imports.

The RBI’s 80:20 scheme for gold imports had left many confused, leading to imports being held up at customs. Gold and silver imports increased to $1.3 bn in the month under review from $0.8 bn in September, 2013.

Reacting to the export numbers, India Inc urged the Government to restore duty drawback rates to bring down the trade deficit. “CII strongly recommends restoration of Duty Drawback Rates which have been reduced drastically last month. This will further help in gaining and maintaining India’s share in the global market,” Sanjay Budhia, Chairman, National Committee on Exports and Imports of CII saidsaid.
Duty drawback is the refund of duties on inputs imported for export items.

The government had recently rationalised the duty drawback and brought more items under the scheme for tax refund to exporters. It had reduced the rates for different engineering items.
Trade deficit jumps to $10.55 bn.

Meanwhile, the government data showed that the country’s trade deficit rose to $10.55 bn in October after narrowing to two-and-a-half-year low of $6.7 bn in the previous month as purchases of gold and silver picked up ahead of the festive season.

The value of gold imports jumped to $1.37 bn in October as compared to $800 mn in the previous month.

“Curbs on gold and silver imports have worked,” Rao said adding there were positive trend in India’s foreign trade as exports growth was consistent.

Cumulative trade deficit for April-October period of the current financial year is recorded at $90.68 billion, sharply lower than $112.03 billion registered in the corresponding period of last year.

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Government likely to double export target to $1 trillion

NEW DELHI: The government is expected to double the export target to $1 trillion in the next five-year foreign trade policy even though the current policy that runs until March 2014 is all set to miss the $500-billion target set for exports.

A senior commerce department official told that the government has begun work on the foreign trade policy for 2014-2019, which will aim at doubling India's share in global trade from the current 3%. The policy is, however, expected to be announced only after the new government assumes office after the general elections next year.

"After the very successful 2009-14 foreign trade policy, we have started working towards the policy for the next five years," the commerce department official said. "Consultation process has started for that. We want to focus on the high-value exports and import substitution, such as engineering, aeronautics, cars, where value addition is the highest."

The proposed 2014-19 policy would include measures to make the country's outbound shipments more competitive by boosting productivity and generating exportable surplus.

"It will require support from the government to provide support for marketing, export infrastructure including improved logistics, keeping in mind the current situation of CAD (current account deficit)," said an inter-ministerial note moved for consultation on the new policy.

People aware of the consultations said the government is likely to set the export target for the new policy at around $1,000 billion.

The inter-ministerial note also explains the proposed policy would include a long term and a medium-term strategy to enhance trade competitiveness and overall growth of India's foreign trade.

Since 2009, India's exports have nearly doubled from $178 billion in 2009-10 to about $325 billion. The foreign trade policy for 2009-14 provided fiscal incentives to traditional sectors in the form of interest subvention and other duty neutralisation schemes to provide refund of indirect taxes and levies.

It focused on export promotion of capital goods and market diversification and product diversification. Incentives were provided under focus product and focus market schemes to encourage exporters to explore markets like Latin America and Africa.

The share of exports to Latin America has gone up from 2.9% in 2008-09 to 4.5% in 2012-13. India's rising current account deficit has prompted the government to promote import substitution through the new policy. India's CAD widened to a record high of 4.8% of the GDP in 2012-13 and 4.9% of the GDP in the first quarter of the fiscal.

After remaining muted for a year, India's exports grew in double-digits in the three months starting July, expanding by 11.2% in September.

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RBI permits third party payments for export, import transactions

The Reserve Bank of India (RBI) on Friday permitted third party payments for export/import transactions subject to certain conditions.

Among the key conditions RBI said that for export transaction firm irrevocable order backed by a tripartite agreement should be in place while for import transactions firm irrevocable purchase order / tripartite agreement should be in place.

RBI also said that for the export as well as import transaction third party payment should come from a Financial Action Task Force (FATF) compliant country and through the banking channel only.

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Analysts happy with fall in imports by India, growing exports

India’s exports kept up the pace for the fourth straight month by expanding at 13.5% -a 24 month high. Imports too declined in Oct’13, though the pace slowed down a little. Non-oil imports declined by 22.8%, with oil imports posting a marginal pick-up in growth. Cumulative trade balance was at $90.7 billion during Apr-Oct’13.

"The good thing is that gold imports did not show a significant turnaround in Oct’13, though on a sequential basis such imported jumped by 71.3%. Also, India has gained in market share in apparel exports to USA in current fiscal, an encouraging development," said State Bank of India in a note.

India’s exports registered a growth of 13.5% in Oct’13 to $27. 3 billion from $24. 0 billion in corresponding month of last year. This is the fourth straight month of double-digit growth in exports and pace of growth in Oct’13 is the highest in last 24 months. Cumulative value of exports for the first seven months of FY 14 (Apr-Oct) were valued at $179. 4 billion as against $138. 7 billion, registering a year on year growth of 6.3%.

If Oct’12 export figures were not revised, export growth would have been lower at 9.5%.

Imports during Oct’13 were valued at $37.8 billion, a negative growth of 14.5% over the level of imports valued at $44. 2 billion in Oct’12. Oil imports in Oct’13 were valued at $15. 2 billion, 1.7% higher than $15. 0 billion in the corresponding period last year. Provisional data showed that gold import increased to $1.4 billion in Oct’13 from unrevised $800 million a month earlier, a growth of 71%. However, the good thing is that Oct’13 gold import is still 80% lower in value terms against the gold import of the same period last year.

"We continue to maintain a trade deficit at $170 billion for FY14, with a CAD at $55 billion / 3. 1% of GDP, with downside," it added.

"A significant decline in gold imports and weak capital and consumption goods’ imports, due to subdued domestic demand, will help lower growth in non-oil imports during rest of this year," predicted CRISIL Research. "Improvement in exports due to a weak rupee, low base and improved global demand, will also aid in lowering trade deficit in 2013-14. Lower merchandise trade deficit, along with a healthy growth in IT/ITes exports, create downside to our forecast of current account deficit at 3.9 per cent of GDP for 2013-14," it said.

"We expect the current account deficit to moderate to USD 54bn in FY14 (year ending March 2014) from USD 88.2bn in FY13 due to better exports, weak domestic demand and a policy-driven reduction in gold imports," said brokerage Nomura. "Large inflows under the FCNR(B) deposit scheme and the delayed QE taper have led to a surge in capital inflows since September. However, with the FCNR (B) deposit window to close soon (by end-November), oil marketing companies’ demand gradually being shifted back to the market and changing expectations around the US QE taper (our US economists now assign a higher probability to a taper in January 2014 relative to March 2014), financing may remain a challenge," it added.

“The EXIM Trade Data released today reaffirmed the reversal of negativity," said Sanjay Budhia, Chairman of CII's National Committee on Exports & Imports. "Exports since last 3 months, from August , September and October 2013, have come to positive growth trajectory due to stability in the global market, particularly with our large trading partners like US and Europe.

"Also the timely Intervention by the Commerce Ministry in terms of expanding Focus Product and Focus Market Scheme have helped Indian Exporters to withstand the vagaries of tough competition. CII strongly recommends restoration of Duty Drawback Rates which have been reduced drastically last month. This will further help in gaining and maintaining India’s Share in Global Market," he added.

SBI noted that the incremental share of price sensitive items in Indian exports has been higher in current fiscal, though the pace has slowed down a bit in recent months.

The bank's research team has an export target of $320 billion for this year, nearly matching the Government target.

"In principle, coming festive season would further boost export demand in the developed economies aiding trade deficit to narrow down to a comfortable zone," it said.

However, cumulative oil imports in Apr-Oct FY14 were $98. 1 billion, 3.3% higher than the oil imports of the corresponding period last year. Meanwhile, non-oil imports contracted for the fifth consecutive month in row to $22.6 billion at 22.8% lower compare to Oct’12. H owever, tracking the trade deficit on a month on month basis, trade deficit increased in Oct’13 after having declined to a two-and-a-half-year low the previous month.

The deficit widened to $10.6 billion from $6.8 billion in Sep’13. A year earlier, the gap was $20.2 billion. Widening trade deficit in Oct’13 was aided by higher oil and gold demand. India’s share in the US textile import has remained promising. In the first eight months of 2013 (Jan- Aug) , India’s share has increased to 6.2% f rom 5.8% in 2012 and 5.9% in 2011. Further recovery in the US would add to the domestic export revenue.

"Imports contracted 14.5% y-o-y in October compared with a decline of 18.1% in September, which reflects continued weakness in domestic demand.Overall, global demand is improving, but higher imports (of oil, gold and others) have led to the deterioration in the trade deficit. The rise in imports is due to seasonality, as imports tend to rise ahead of the festival season. On a seasonally adjusted basis, we estimate that the trade deficit narrowed to USD7.3bn in October from USD7.5bn in September," Nomura said.

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Row over export of fresh vegetables to Saudi Arabia.

Saudi Arabia the fifth-largest importer of fresh vegetables from India, has said pesticide residues in the commodity are higher than permissible levels. It has threatened to take strong action in the near future.

In an advisory to the Agricultural and Processed Food Products Export Development Authority (Apeda), the government of Saudi Arabia said high levels of pesticide residues were detected in two consignments of green chilli. "It has been brought to the notice of authorities of KSA (Kingdom of Saudi Arabia) that in some recent consignments of vegetables from India, there have been interceptions of higher than permissible levels of residues of pesticides. If the situation persists, the government of KSA will take strong action in the near future," the advisory said.

Saudi Arabia accounts for Rs 92 crore of annual imports of fresh vegetables from India. With Rs 284 crore of imports, Pakistan was the largest importer in 2012-13, followed by the UAE (Rs 255 crore) and the UK (Rs 151 crore). With Rs 143 crore of fresh vegetable imports, Nepal was fourth on the list.

“Volume is not a worry. The only worry is the action, as prescribed by the Saudi Arabian authorities. If they ban vegetable imports from India, other countries in West Asia may follow, impacting India's overall vegetables exports severely,” said Vinod Kaul, deputy general manager and head (horticulture), Apeda.

Though Saudi Arabian authorities haven't specified the permissible limit of pesticide residue, it is usually understood the specifications by the European Union are applicable. Specifications by Codex, as well as other global norms, are also understood to be applicable on fresh vegetable exports to Saudi Arabia.

In an advisory to exporters, Apeda has advised adherence to the import requirements of Saudi Arabia, adding products should be tested before exports. “As a region, West Asia is very important to us. We, therefore, do not want any strong action by Saudi Arabia, and its repercussion on other countries in the region. Hence, we have advised our members to test export oriented goods carefully before shipping,” said Kaul.

West Asia accounts for about a third of India's overall fresh vegetable exports. I 2012-13, total exports of fresh vegetables stood at Rs 1,334 crore, a rise of 2.7 per cent compared with Rs 1,299 crore in 2011-12.

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Indian garment exporters eat into share of China and Bangladesh

India's garment exports to EU increased 5.9% year-on-year in January-May 2013, whereas those of China and Bangladesh declined.

India’s apparel exports are rising, primarily because the country is eating into the shares of neighbouring China and Bangladesh. Exports from India are being driven by demand from major textile importing regions such as the US and Euro zone.

Currently, China is facing high labour costs, and this is working in India's favor. Also, the yuan has risen against the dollar, and this has reduced its competitive edge. In September, Bangladesh saw a protest by labourers, who demanded higher wages. Also, the collapse of Rana Plaza,  a huge garment factory in Bangladesh on April 24 2013, has caused concern on safety and working conditions in that country.

Exports from India, on the other hand, have been aided by the falling rupee. India's garment exports to the European Union increased 5.9 per cent year-on-year in January-May 2013, while those of China and Bangladesh declined 9.7 per cent and 1.8 per cent year-on-year, respectively, according to data from the Apparel Export Promotion Council (AEPC).

In September, apparel exports from India rose 14.95 per cent to $1.11 billion. In the first half of this financial year, India exported apparel worth $7.9 billion, a rise of 13 per cent over the year-ago period, according to data collected by AEPC. For this financial year, Union textile minister K S Rao has pegged apparel exports at $20 billion. Last year, apparel and garment exports stood at $14 billion.

“In the last few months, our garment orders have gone up due to issues in Bangladesh. Importers now prefer to import from India, rather than Bangladesh due to safety-compliance issues there,” said M Shivkumar, chief financial officer, Raymond.

Orders from the Euro zone have risen 15 per cent compared to last year. Orders from the US, too, have increased. Exporters are also seeing good demand from West Asia and Japan. India has also started exporting apparel to Latin America, Russia and Australia.

Owing to the good export demand and the fall in the rupee, stocks of textile companies have risen in the last two months. During this period, shares of textile companies outperformed the S&P BSE Sensex, which rose 10.25 per cent. By comparison, the Raymond stock rose 40 per cent, Arvind 33 per cent and Alok Industries 18 per cent.

India Ratings & Research, a Fitch Group research agency, expects this trend to continue in the short to medium term. “Strong revenue growth and earnings in FY14 are likely to improve the credit metrics of garment exporters. However, exporters may find it challenging to manage liquidity amid increasing volumes, a long working capital cycle and the consequent higher use of working capital limits—a characteristic of the textile export business,” India Ratings & Research said in a report.

Most exporters are running on full capacity and outsourcing manufacturing, as order books are increasing ahead of the peak festive season (December). “This year, growth in the number of orders is very strong and the rupee’s current levels are working in our favor. No, India has become a preferred nation for apparel exports, which is also working well for the Indian apparel industry,” said Premal Udani, ex-chairman of AEPC.

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India's rice exports seen at record 11 mn tonnes: USDA

India's rice exports are estimated at a record 11 million tonnes in 2012-13 marketing year ended September this year on bumper production and strong overseas demand, according to the US Department of Agriculture (USDA).

Rice exports of India, the world's second largest rice producer, stood at 10.38 million tonnes in 2011-12 marketing year (MY) that runs from October to September. "MY 2012/13 export estimate is raised to a record 11 million tonnes based on preliminary official statistics for October 2012 to August 2013, and shipping data compiled by a private source for September 2013," USDA said in a report.

USDA has also revised upwards the rice export estimates for MY 2013-14 to 10 million tonnes from earlier projection of 9.3 million tonnes. However, exports are still expected to be lower than the record 11 million tonnes in previous year.

"Based on the relatively strong export demand for Indian rice, both basmati and non-basmati, and sufficient domestic supplies, the MY 2013/14 rice export estimate is raised to 10 million tonnes," the report said. "While exports of basmati rice are likely to grow further, total exports are likely to be lower than last year's record sales due to relatively tight domestic supplies of non-Basmati rice and food price inflation concerns in an election year," it added.

Quoting market sources, the Department said exports of non-basmati rice have slowed down from in October 2013 due to the strengthening of the Indian rupee compared to the US dollar (current 61.5 from 65 in August/September).

India had lifted the four-year ban on non-basmati exports in September 2011. It had emerged as the world's largest rice exporter in 2012 ahead of its Asian counterpart Thailand. On production, USDA has projected an output of 105 million tonnes in 2013-14 as against 104.4 million tonnes in the previous year.

The department "continues to estimate MY 2013/14 rice production at 105 million tons from 43.5 million hectare." The harvest of kharif rice is in full swing in northern states and initial harvest reports suggest good yields.

"Crop damage was reported due to Cyclone Phailin in coastal Odisha and Andhra Pradesh, and ongoing floods due to heavy rains in some parts of Odisha, West Bengal and Andhra Pradesh. With rice at the grain filling stage, crop damage is likely to be heavy in the flood-affected areas," the report said.

The department said it continues to estimate MY 2013/14 production at 105 million tonnes till an assessment of crop loss is made. "Market sources report that the crop loss due to cyclone and floods in the eastern coast could be in the range of 1-2 percent of forecast production," the report said.

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