Export Potential for Milk Powder

International Trade Operations Project Development of Export Strategy

ITC HS 040210: Milk

powder not exceeding

1.5% fat

ASHISH KHOLA 12A DEEPIKA RASTOGI 15A KHUSHIT MEHTA 21A

ITOD Report HS 040210 12A_15A_21A

Table of Contents

Indian Dairy Industry – An Overview Production Policy and Regulation of Dairy products Export Scenario of HS 040210 Value Chain Analysis Incentives for exports Challenges of Export of SMP Export Potential of India Potential destination – Russia Export to Russia - Vital information References


List of Tables and Figures

Table 1. Milk production in various countries w.r.t ECM and Natural content Figure 1 Pie Chart showing consumption break up in India Figure 2. Top milk producing states Figure 3. Graph showing Exports from India to World for HS 040210 Figure 4. Break-up of Indian Exports in 2013 Figure 5. Growth Percentage in value to the world Figure 6. Exported Growth Percentage to world year wise Figure 7. Exported Unit value in US Dollar/Tons Figure 8. Share of Value In India’s Exports Figure 9. Trade Balance in 2013 for top 6 countries in USD 1000 Figure 10. Exports Across major destinations during 2008-09 (000’ million tons) Figure 11. India’s exports to Russia, USD thousand


1. Indian Dairy Industry – An Overview The Dairy industry in India has witnessed a remarkable journey in last few decades.

From being a laggard and net importer of dairy products in 1950s and 1960s, India has covered a lot of ground. India now is world’s largest producer of milk and a net exporter of milk products. The credit of this transformation is largely attributed to “Operation Flood” (a co-operative led movement started in 1970s which took in its fold millions of small holding farmers who joined the three tier co-operative structure and increased India’s milk output at a compounded annual growth rate (CAGR) of 4.7% since 1969, up from a 0.7% CAGR from 1947 to1969) and other important schemes by the government such as establishment of institutions like the National Dairy Development Board (NDDB), de licensing of dairy sector MMPO etc.

Table 1. Milk production in various countries w.r.t ECM and Natural content

Now India ranks first in the world in milk production accounting for around 17% of the global milk production, which has gone up from 53.9 million tons in 1990- 1991 to 127.9 million tons in 2012-13. It also has the largest cattle (185.2 million, 2.1 kg dairy yield/animal and contributed 38% of total milk production) and buffalo population (97.9 million, 2.6 kg dairy yield/ animal and contributed 54% of total milk production) total population in the world. Besides being the largest producer it is also the largest consumer due to which it is a very minor player in the world dairy market, accounting for a miniscule 0.08% of the world dairy exports. Vast majority of the milk seldom crosses the nations’ border and the focus of the dairy industry mainly remained local.


But the brighter part is that the per capita availability of milk has also increased from 176 grams per day in 1990’s to 295 grams per day in 2013-14 vowing to various schemes like

1. The Intensive Dairy Development Programme 2. Strengthening infrastructure for quality and clean milk production 3. Assistance to Cooperatives, and Dairy Entrepreneurship Development Scheme 4. Dairy Venture Capital Fund 5. Dairy Entrepreneurship Development Scheme 6. The National Project for Cattle and Buffalo Breeding which has been under

implementation since 2000. A new scheme called the National Dairy Plan Phase I has also been initiated in 2013-14.

Figure 1 Pie Chart showing consumption break up in India The per capita availability of 290 grams per day is comparable with the world per capita availability of milk at 289.31 grams per day for 2012. This represents sustained growth in the availability of milk and milk products for the growing population of the country. Also the price of milk in India is lower as compared to various countries of the world. For instance Price in India is half that of USA. Hence promoting milk and its products as exports is a viable option which the cooperatives and private players can make it together. The rapidly rising integration of global production patterns and markets and reducing trade barriers add a boost to the trade.

46%

28%

6% 7%

6%

4% 2% 1%

ConsumpEon In India

Fluid Milk Ghee BuNer Yogurt Khoa Milk Powder Paneer Others


Figure 2. Top milk producing states 2. Production Policy and Regulation of Dairy Products: Milk production in India, the world's largest producer, stood at 132 million tonnes in 2012-13. Dairy production in India runs on a low input output system, in which individual producers typically own less than five cattle or buffalo and use locally available feeds. This has resulted in yield levels that are below international averages but also the world’s lowest production costs. As dairy product prices and income from milk collection continue to increase, farmers are slowly growing herd sizes andincreasing their specialisation. In addition, interests from private sector investors have also facilitated construction of larger dairies through partnering with dairy processors. Through implementing various incentive schemes, Indian policy makers are aiming to increase the country’s dairy output. Examples of these schemes include the Ministry of Agriculture’s research programs, imports of bovine semen and embryos, the National Project for Cattle and Buffalo Breeding, which focuses on improving Indian indigenous breeds with an allocation of USD 255 million. On the other hand, support is also offe


red by the private sector through activities such as artificial insemination services, training for veterinary care and other livestock management skills. In 2010, the government and the National Dairy Development Board have drawn up a National Dairy Plan (NDP) that proposed an expenditure of around USD 378 million to nearly double India’s milk production by 2020. This plan will endeavour to increase the country’s milk productivity, improve access to quality feeds and improve farmer access to the organised market. These goals will be achieved through activities that focus on increasing cooperative membership and growing the network of milk collection facilities throughout India. In addition, the new Food Safety and Standards Authority of India has consolidated various previous policies that set the sanitary requirements for food safety, machinery, premises, quality control, certification, packing, marking and labelling standards for all food products, including milk and milk products and aims to regulating food safety in India through one overarching regulation. The forthcoming regulation, named The Food Safety and Standards Regulation, is implemented in 2011. Although the Food Safety and Standards Authority of India sets the safety standards for both domestically produced and imported milk and dairy products, the Ministry of Agriculture’s Department of Animal Husbandry, Dairying and Fisheries is the entity that is responsible for issuing sanitary permits for the import of livestock and dairy products into India. 3. Export Scenario of HS 040210 from India Composition of Indian Exports – India exports various categories of milk products including milk powder, baby food, butter and other fats, casein, milk and cream, cheese, and whey products. Milk powder and baby food export constitutes around 50% of the total dairy exports in volume terms during 2008-09, followed by butter and fat, casein, milk and cream and other processed dairy products. As regards the profile of India’s export basket, Skim Milk Powder (50%), butter and other fats (21%), casein (11%), cheese and curd (4%), whey products (3%), milk cream (11%) dominated the export of dairy products from India during 2008-09. India's exports represent 5.05% of world exports for this product, its ranking in world exports is 6. Total export of HS 040210 from India in 2013 is 482543 USD Thousand Dollars. After 2008 it saw a decline but the export increases in 2011 and 2012.It saw a major rise in 2013 but it is declined in 2014 again.


Figure 3. Graph showing Exports from India to World for HS 040210 Major Countries in which the product is exported from India are Bangladesh, Egypt, Algeria, Saudi Arabia, Yemen and Pakistan. These are the six major countries in which the milk powder with fat not exceeding 1.5% is exported. Bangladesh is the leader importer of HS 040210 from India.

Figure 4. Break-up of Indian Exports in 2013 Exported growth in Value is major in 2011-2012, while it is negative in 2010-2011 and 2008-2009. There is also negative growth in 2013-2014. This leads to the pattern of dwindling export value so that the entire value chain needs to be reorganized and competitiveness needs to be met keeping in mind the productivity.

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Export from India to World for HS 040210

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Bangladesh

Egypt

Algeria

Saudi Arabia

Yemen

Pakistan

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India's Export in 2013


Figure 5. Growth Percentage in value to the world Now comparing the major Export growth in Quantity from India to the whole world for HS 040210, 2011-2012 saw a major rise in growth from the last year while there is negative growth for 2010-2011 and 2013-2014. There is a steep decline after 2012 in the export of HS 040210 from India.

Figure 6. Exported Growth Percentage to world year wise Now comparing the exported unit value in US Dollar/Tons we get to know that it is almost in the range of 3200-3600 except 2009 and 2010 in which it is around 2200. It is maximum in 2014(3581 with a growth of 15%). The growth on an average for the whole years is around 12.5%

52 -‐75 36 -‐82

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Exported Growth % In Value to World

2007-‐2008 2008-‐2009 2009-‐2010 2010-‐2011

2011-‐2012 2012-‐2013 2013-‐2014

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Exported Growth % in QuanEty to World

2013-‐2014, % 2012-‐2013, % 2011-‐2012, % 2010-‐2011, %

2009-‐2010, % 2008-‐2009, % 2007-‐2008, %


Figure 7. Exported Unit value in US Dollar/Tons Now the Major countries in which milk powder is exported majorly is shown in the map below.

The share of different countries by value in the export of India is compared for the recent 5 years and Bangladesh is the leader in the same and Nepal is least among the top countries.

2007, 3239, 13%

2008, 3499, 14%

2009, 2311, 10%

2010, 2210, 9% 2011, 3040, 13%

2012, 2924, 12%

2013, 3319, 14%

2014, 3581, 15%

Exported Unit Value,US Dollar/Tons

2007 2008 2009 2010 2011 2012 2013 2014


Figure 8. Share of Value In India’s Exports Trade Balance of India for HS 040210 with top 5 countries is compared and again, we have a positive trade balance with Bangladesh and Egypt is ranked after Bangladesh. Algeria remained at third position.

Figure 9. Trade Balance in 2013 for top 6 countries in USD 1000

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World

Bangladesh

Pakistan

Yemen

Malaysia

United Arab Emirates

Syrian Arab Republic

Algeria

Nepal

Share in Value in India's Exported, %

2014 2013 2012 2011 2010

95559

74706 39236

35700

34395 30285

Trade Balance in 2013 for top 6 Countries in USD 1000

Bangladesh Egypt Algeria Saudi Arabia Yemen Pakistan


Export Trends India exported more than 50 percent of its total dairy products shipments to the United States, Bangladesh, U.A.E., China, Egypt and Singapore during 2008-09. The trend in direction of exports indicates that Asia is the major destination of dairy exports from India. During1991 to 2008 India has exported dairy products to the world market worth US $ 162.93 million, while the corresponding figure for Asia is US $ 132.86 million. The exports were made to 105 countries in the world, at least for one year. Among these 40 are Asian countries.

Although the number of non Asian countries is comparatively more than the Asian destinations, yet the percentage share of all Asian countries together is much more than the rest of the world export partners. The average share of Asian countries during the past period 1991 to 2008 is about 80 & 82% on quantity & value basis respectively. Among the Asian markets, Egypt & UAE are the most top two destinations of our dairy products. For the past 10 years, 1998 to 2008, UAE is the largest importer of milk & milk products from India. Singapore and Bangladesh are also two attractive destinations for dairy exports. The shares of Oman, Yemen, Saudi Arabia, Singapore, South Korea & Nepal have shown an upward trend after 1997, while Philippines, Kuwait, Bahrain & Afghanistan suffered a downward trend in their share of total India’s export to Asia.

Figure 10. Exports Across major destinations during 2008-09 (000’ million tons)

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4. Value chain analysis of SMP A process based value chain for SMP was unavailable. Hence, we have shown a process based value chain for dairy. The value addition in termsof value chain is shown for SMP.


5. Incentives given to exporters: Various incentives have been availed to dairy products (come under APEDA) by the government of India to promote exports which include: Tariffs and APEDA schemes: This scheme includes establishment of common infrastructure facilities by APEDA or any other Government or Public Sector agency. – VKGUY earlier covered the export of SMP (Skimmed Milk Powder). On November 22, 2012, the Government of India lifted its ban on the export on milk and cream, concentrated and/or sweetened milk and cream, whole milk powder, dairy whitener and infant milk foods. On November 21, 2012, India revised its tariff rate quota (TRQ) on dairy products falling under harmonized system (HS) code 040210 and 04022100 (SMP). Under the notified TRQ, India will permit imports up to 10,000 metric tons (MT) of SMP per fiscal year at a tariff rate of 15 percent. Quantities above 10,000 MT will incur a 60 percent tariff. During fiscal year 2011/12, India permitted imports up to 50,000 MT under the TRQ at zero duty.


Schemes for Quality Development Here assistance provided for setting up/strengthening laboratories, installing quality management, quality assurance and quality control systems and Activities related to standardization. Schemes for Market Development Assistance is given for development of packaging and establishing packaging standards, Feasibility Studies, Surveys, Consultancy and Database Up-gradation and Export Promotion and Market Development which includes brand promotion, trade fairs, exhibitions etc. Schemes for Research and Development Assistance is provided for technology development through R & D efforts with research institution under Government/Public Sector, recognized exporters associations of APEDA to support relevant research and development for export enhancement through R & D organizations in co-operative/private sector. Certification Scheme for Dairy Product Exports Dairy products are governed by the Compulsory Quality Control, Inspection and Monitoring Notification which sets the standards for dairy exports including sanitary and hygiene. Recognition is also given to the Codex Alimentations Commission (CAS) standards, the national standards of the importing countries or the contractual specifications if any, provided these are not below the national standards as specified in the notification. The notification also specifies the type of quality controls and inspection as per the export of milk products (Quality control, Inspection and Monitoring) Rules, 2000, applicable to milk products prior to exports. 6. Challenges for export of Skimmed Milk Powder: Trade in dairy products is very volatile, as dairy trade flows can be affected by (a) Overall economic a situation in a country, (b) Fluctuations in supply and demand, (c) Changing exchange rates and (d) Political measures. Additional volatility is introduced by the fact that the global dairy market is extremely concentrated in terms of buyers and sellers; hence, supply or demand shocks are not easily absorbed. Increasing Domestic Demand: Demand for milk & milk products in India are estimated to grow at the fastest pace amongst major food commodities. Therefore, with huge domestic market & buoyant demand, there is limited scope for large scale exports of milk & milk products from the country.


On Again Off Again Dairy Imports and Exports: Dairy exports were embargoed on February 18, 2011 in response to the Government of India’s concerns over domestic food inflation pressures. By June 2012, SMP stocks had grown, driving down prices and causing some local milk processors to threaten to stop procuring milk. As a result, the embargo waspartially lifted on June 8, 2012, allowing the export of SMP. Despite opening the market for SMP and casein, exporters report they were unable to sell significant volumes due to price constraints and buyers’ lack of confidence in India as a reliable supplier. Recognizing that stocks remain high at the beginning of India’s flush production season, the export embargo was completely lifted on November 1 (allowing whole milk powder, etc. for export). Government withdrawal of VKGUY incentive: With milk prices shooting up, the government on Tuesday withdrew the incentive on export of skimmed milk powder (SMP) to boost domestic supply and cool prices. "Vishesh Krishi and Gram Udyog Yojana (VKGUY) benefit on Skimmed Milk Powder has been withdrawn," the Commerce Ministry said in a public notice. With possibility of shortage of fodder in view of deficient monsoon affecting milk production, the Cabinet Committee on Economic Affairs (CCEA) on June 9 has decided to withdraw 5 per cent incentive offered to SMP exporters. Large Unorganised Sector: Indian diary sector is also characterized by presence of prominent unorganized sector. It is estimated that around 40 to 50 percent of Indian dairy farmers are employed by the organised sector, approximately 65 percent of milk in India is consumed (in fluid or processed forms) on farm or by the unorganised sector including local milk vendors, wholesalers, retailers and the producers themselves. This makes it very difficult to follow control and standardize the milk production across India. This results in a lot of malpractices and inefficiency. Slump in prices due to excess supply: Prices of skimmed milk powder, a key constituent in the milk and dairy products industry, have come down significantly globally and in India due to surplus supplies and lower offtake during the past two months. In India, SMP prices have declined to Rs 232-240 per kg, although they are still higher than international rates of Rs 158-160 a kg. There is huge stock in the country with export of milk powder closed. Prices will further come down in next few months by Rs 10-120 a kg. There is unlikely to be any increase in prices of milk and milk products for the next six months," said RS Sodhi, Managing Director of GCMMF, which markets the Amul brand of dairy products. Mother Dairy, which sells about 3.5 million litres of milk a day in Delhi, Mumbai, Hyderabad and the Saurashtra region of Gujarat, also expects prices to stabilise. "From a high of Rs 280-290 early this year, prices have corrected. The country has adequate milk powder stock of 20,000-30,000 tonnes and with the flush season to begin,


prices will fall," said S Nagarajan, MD of Mother Dairy. The flush season runs from October to March, when milk production increases across the country. Image of Indian Dairy Sector: Image of our dairy industry and of Indian milk and milk products is not high enough to export in Western countries. India is lagging behind in terms of:

• Milk quality • Storage and handling of milk • Processing of milk • Adherence to food laws • Adulteration of milk & milk powder

Operational Aspects: There is a great lack of qualified professionals in the Dairy sector leading to haphazard implementation and inefficiency in production. Due to the sector being dominated by unorganized small farmers, very little scope for R&D taking place. As a result the quality of the produce is not up to international standards. Infrastructural Aspects: There are a lot of Infrastructural issues that plague the Indian dairy sector,

• Shortage of water • Lack of education and understanding of hygiene factors • Inadequate power supply

Dairy Producers Face Distribution Challenges Strong producer prices and government incentives have helped increase Indian milk production and have attracted new investment to dairy processing. Despite strong investment and growing procurement, India still faces fluid milk distribution challenges (with the exception of some Indian dairy cooperatives). Given that demand growth is being driven by the fluid milk category, one of the most important challenges in India is delivering fluid milk to consumers at a competitive rate. Industry sources indicate that with an unstable export market and a highly competitive informal sector, new entrants to the dairy industry are challenged to find a remunerative market for their efforts. As a result, processors are producing increasing quantities of SMP as they struggle to serve the fluid milk market. Stocks Will Remain Unchanged Industry sources forecast SMP stocks to remain unchanged over the next six months, at approximately 150 thousand metric tons. In addition to the upcoming flush production season, producers face weak export prospects due to export policy uncertainty. With strong forecasted production and large stocks, questions are rising on the short term stability of new dairy investment in India.


Quality Aspects: As the world is getting integrated into one market, quality certification is becoming essential However, there are very few plants in the country, which have successfully obtained the ISO and the HACCP certification. This noncompliance with international quality and food safety norms such as International Product Standards, HACCP, and GMP/GHP is a major bottleneck, which becomes a barrier to India's competitiveness in exports. Heavy domestic support adds to the woes of developing countries’ dairy producers: National policies that support domestic prices or subsidised production often encourage over- production. This squeezes out imports or lead to export subsidies and dumping at much lower prices in international markets to dispose of the excess production. Developed countries imposing heavy tariffs on imports as compared to developing: Another point to lay new focus on developing countries as new export markets is the heavy imports tariffs by the developing countries which are nearly double as compared to the developing countries. In addition they also provide export subsidies for their milk and allied products to dump in foreign markets. 7. Export Potential of India India is on of the verge of assuming an important position in the global dairy industry. The 50,000 tones branded butter market, valued at US $ 133 million is estimated to be growing at 8.10% annum. The cheese market is estimated to be US $ 110 million in value terms & has been growing at a compounded annual growth rate of 8 – 9 % during 1999 – 2003. The growth in urban areas has been higher at about 15% per annum. The ice – cream market in India is estimated to be about US $ 199 million per annum. A few corporate players including MNCs are now focusing this market. For example, Nestle & Britannia have forayed into emerging segments such as Ultra Heat Treatment & Flavored milk. Dairying has become an important secondary source of income for millions of rural families and for millions has played the most important role in providing employment and income. The per capita availability of the milk has also increased to a level of about 245 gm per day, but this is still low as compared to developed nations or the world average 285 gm per day. Government of India is making efforts to increase the productivity of milk animals and thus increase the per capita availability of milk. The export potential of any product depends largely on two factors: size of the foreign market & bargaining power of the exporting country. Changing food habits will have an important role to play in the increase in the demand for the dairy production in the Asian market. In the times to come, demand will more for products which are high in poly unsaturated fatty acids, more proteins & lactose.


Specifically, dairy products are more popular in south Asia & there demand is likely to grow at a faster rate than any other animal products. Cheese & whey based products will be in the commanding position, thereby replacing fat based products in South & East Asian market. Due to differences in regional income & population growth rates, increase in dairy products consumption may occur especially in central & coastal areas, where potential trade opportunities may exist.

8. Potential Destination -‐ Russia Conclusion – The exports of dairy products from India are increasing. We see a huge and conducive export potential strategy with Russia. The reasons, supported with facts, are as follows – 1. Russia’s ban on EU, US foodstuff (Source: Exim News Service -‐ Mumbai, Aug. 12) Exporters of dairy products will see increased opportunities in the Russian market post banning of food imports from the US and EU in retaliation against the Western sanctions over Ukraine. Amul, owned by the Gujarat Co-‐operative Milk Marketing Federation (GCMMF), which was indirectly exporting skimmed milk powder (SMP) to Russia, may now launch its own brands there in butter, cheese and milk powder. India’s SMP exports to Russia grew ten times to about 3,120 tonnes worth Rs 67.16 crore in 2013-‐14 from the previous year’s 310 tonnes valued at Rs 4.53 crore. India was also trying to export other items like fresh vegetables and poultry products, sources said. Russia, which imports 43 per cent of its foodstuff from the West, spends $ 2.7 billion a year on European fruit and vegetables alone, and also brings in large amounts of meat, dairy products and processed foods. The Federation of Indian Export Organisations (FIEO) is hopeful of the EU and US sanctions facilitating a better opportunity for Indian exporters to enhance their presence in the Russian market. FIEO is organizing a "Made in India" show in Moscow from September 24-‐26 to promote exports.

2. Restrictions Uplifted on Imports of Milk , Cheese and Other Dairy products Russia has lifted restrictions on the import of milk, cheese and other dairy products from India less than a week after allowing buffalo meat from the country. Russian President Vladimir Putin and Indian Prime Minister Narendra Modi are likely to announce a Joint Study Group for a feasibility study on a Free Trade Agreement between the two countries, which would boost trade further. Exporters are excited about the opportunities that Russia holds as India’s exports to the country during the last fiscal year were just $2.15 billion, a small fraction of Russia’s total imports of $318 billion.


“We are in a position to export dairy items worth $400 million in the first year itself. It is likely to go up several fold subsequently,” said Ajay Sahai, Director-‐General and CEO of FIEO. Amul is already exploring opportunities to enter the Russian market and is in talks with Russian company Galaktika for export of cheese and dried milk. Processing units inspected and certified by Russia’s Ministry of Agriculture can export their products to the country.With Russia now formally allowing import of dairy items, more such partnerships will follow. There are hopes that restrictions on poultry products and egg powder will also be removed soon as the Russian Government has indicated its interest. “Russia imports more than $40 billion worth of food items from Western countries, and a large chunk of that business can gradually come to India,” the Commerce Ministry official said. 3. Russia is expected to increase imports of fruits, vegetables, meat and dairy products from India starting December 2014 Under an agreement reached between Russia’s phytosanitary watchdog Rosselkhoznadzor and India’s Agricultural and Processed Food Products Export Development Authority (APEDA) this week. Russian veterinary experts are expected to arrive next month and may stay in India to control the production chain and shipment of products to Russia, as is being done in China. The move will help boost India’s meat and seafood exports to Russia as well. India is the world’s largest producer of milk, and a top exporter of meat and seafood products, but exports to Russia are negligible, partly due to the strict quality standards and Russia’s preference for agriculture products from Europe and neighboring countries. It is estimated that Russia will have to source food products worth $16 billion as a substitution for products from EU alone. Russia’s annual milk and milk products import requirements are estimated at above 5,000 million tonnes , and the country used to buy 50% of its dry milk and cheese from the former Soviet Baltic republics and Finland. The ban has led to huge opportunities for the Indian dairy sector, allowing India’s largest exporter of milk products, Amul, to become the first Indian dairy company to enter the Russian market. 4. The Interest of AMUL to export to Russia Recently, GCMMF had said it is in discussion with Galactika Group to export dairy products to Russia and once sealed, Amul would become the first Indian dairy products maker to enter into that market. Amul officials have realized that Russia is going to be a very good market for Indian dairy products exporters. We can start exports to Russia after the approvals come. He said Russia presents huge potential for country's exports as 30 per cent of that country's requirements (dairy products) are imported.


Russia imports about 8-‐10 lakh tonnes of milk powder and 20 lakh tonnes of cheese per annum. "Amul's exports stood at Rs 540 crore last year. At present, the international prices of milk commodities are very low. We right now focussed more on Indian market. In India, milk and milk products are growing in double digit. Amul is growing at over 24 per cent per annum. On Amul's revenues, he said the aim is to touch Rs 50,000 crore mark by 2020 and this year the turnover may reach Rs 22,000 crore. "Around 45 per cent revenues come from fresh milk sales. Presently, we have got the processing capacity of 230 lakh litres of milk and in the next two years we are expanding it to 320 lakh litres. 5. WTO Accession Russia became a full member of the WTO in 2012. It’s now expected to follow WTOrules and become integrated into the global economic system. Russia has committed to:

• change customs duty rates to permit access to the Russian services market • apply recognised food safety, and animal and plant health measures • simplify import licensing procedures

6. Growing demand in Russia along with growing exports from India Russia is currently the eighth largest economy in the world. It’s been predicted to become the largest consumer market in Europe by 2020. According to data with the Russian Federal Customs Service, import of milk and products made from Western countries to Russia rose 10.4 per cent in the first quarter of 2014 to 1,423 million tonnes on a year-‐on-‐year basis. Import of milk and dairy products rose in Russia because of shortage of raw milk and cheaper import prices. India’s exports to Russia stood at about $2.15 billion in financial year ended March. This was a fraction of Russia’s total import of $318 billion. Of this, about $40 billion was spent to import food items from Western countries. Experts have estimated India could export about $400 million worth of dairy products to Russia in the first year itself.


India’s exports to Russia, USD thousand 9. Export to Russia – Vital information: Tariff – 13.73% (on HS 040210) Documents required – BIS Certification (mandatory), in addition to the regular documents. 9 documents are required for export to Russia, with a lead time of 36 days. A COO is not required at this stage, since it won’t lead to preferential treatment. The Federal Customs Service regulates all goods imported into Russia. Customs duty can be calculated and paid in:

• percentage of customs value of goods imported • specific value, charged for one piece of the relevant goods category • combined volume, a combination of the above

Import customs duties are collected based on the classification code and the country of origin of the goods being imported. In the majority of cases, they are 5%, 10% and 15%. Certain goods are exempt from import customs duties. The import of certain goods require a licence. Challenges to Russian Export:

• Russia is a geographically vast market, spanning nine time zones and encompassing over 17 million square miles.

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• Seriously underdeveloped infrastructure poses logistical challenges, especially in accessing markets outside of major cities.

• An incomplete transition from central planning has led to an insufficiently integrated economy and disparities in wealth distribution, geographically and demographically.

• Conducting business may be impeded by: burdensome regulatory regimes; inadequate IPR protection and enforcement; extensive corruption and inadequate rule of law; inconsistent application of laws and regulations; lack of transparency; and the continued presence of large state-‐owned or controlled enterprises in strategic sectors of the economy.

• Recent reforms make it easier for companies to hire expatriate employees, but the Russian immigration and visa system requires time and patience for business travelers to obtain necessary permissions to do business in Russia.

• English is not widely spoken, although knowledge of the language is expanding, especially in the major cities.


References

http://www.business-standard.com/article/companies/amul-to-be-first-dairy-firm-to-export-to-russia-114122400485_1.html

http://www.eximin.net/NewsDetails.aspx?name=26384

http://economictimes.indiatimes.com/news/economy/foreign-trade/eu-to-end-milk-quota-system-indias-exports-to-take-a-hit-as-dairy-supply-to-rise/articleshow/46657130.cms

http://www.thehindubusinessline.com/news/international/after-buffalo-meat-russia-opens-doors-to-milk-dairy-products-from-india/article6680023.ece

http://www.indiantradeportal.in/vs.jsp?lang=0&id=0,10,567

http://businesstoday.intoday.in/story/exports-to-russia-may-start-after-regulatory-approvals-says-amul/1/214197.html

http://in.rbth.com/economics/2014/10/01/indias_food_exports_finding_niche_in_russia_38711.html

http://www.dairyreporter.com/Manufacturers/Russian-dairy-Galactika-and-Indian-coop-Amul-hold-export-talks

http://in.rbth.com/economics/2014/09/18/indian_dairy_meat_products_may_be_available_in_russia_from_december_38389.html

www.trademap.org

www.apeda.gov.in

www.zauba.org

www.google.co.in

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