Thursday, April 19, 2007

Infrastructure, not trade barriers, hurting horticulture exports

Mint reports
High delivery costs, caused primarily by a fragmented supply chain, bad logistics, together with poor standards are hurting India’s horticulture exports much more than trade barriers, says a new report prepared by the World Bank for the agriculture ministry.

Despite producing 11% of the world’s vegetables and 15% of fruits at very competitive costs of about 53% and 63% of average global prices, India’s share in global fruits and vegetables trade has remained at only 1.7% and 0.5%, respectively.

Lead economist with the Bank Aditya Mattoo says, “India is paying a huge logistical tax on agricultural products. The inability to compete abroad today might lead to the inability to compete at home tomorrow. And in horticulture, subsidies are not even an issue.” India has been strongly protesting the multilateral trade negotiation rounds against the high domestic farm subsidies enjoyed in the Euro area, the US and Japan.

The report therefore argues for creation of an integrated and competitive supply chain for agriculture along with radical reform in transport, storage and distribution services before India opens up to foreign competition.
Protectionists in India never miss a chance to point out to high domestic subsidies in US - for at least two reasons. They say US has double standards - even though its they who are guilty of that, having thanked these very subsidies when in the pre-Green revolution days. They say the root of all agricultural woes lie in these subsidies - when there is a bigger problem right here. I am not justifying policies of US, EU or Japan. But I dont think protectionist arguments based on US subsidies aren't justified.

Steel industry wants new panel on mineral policy

PTI reports
“The Hoda Committee has been unable to address the interest of steel industry. The need of the hour is to conserve iron ore to protect the future of steel utilities. So, there is an express need for setting up a new panel to delve into the entire gamut of issues pertaining to iron ore and come out with a mineral policy for the benefit of one and all,” the (Indian Steel Alliance) official said.

After sugar, state to bail out mango growers now

ET reports
THE Maharashtra government seems to have developed “sweet tooth”. Having pumped in hundreds of crore to rescue sugarcane, the cashstarved Maharashtra government is set to help mango.

The state government is giving finishing touches to a financial package for the mango farmers in Konkan, Mantralaya officials told ET. The package could be announced at the cabinet meeting next week, sources said. The state has around 4.5 lakh hectares of land comes under mango orchards, most of it in Konkan. In 2005-06, the state produced more than 6.3 lakh metric tonnes of mangoes. The current season, however, is likely to see the output drop to less than 3 lakh metric tonnes, officials said.

Interestingly, revenue minister Narayan Rane and his bete noire Ramdas Kadam, Leader of the Opposition in the legislative assembly, are seen helping the government in finalising the package, sources said. Both the leaders are from Konkan.

The package would be the first major sop for the region since Mr Rane became the revenue minister. “It’s very important for Mr Rane to pull this off for his region. Sugar barons from western Maharashtra and Marathwada have recently cornered huge subsidies for their regions,” sources said.

A substantial drop in the mango output this season has made legislators from Konkan seek a compensation from the government.

How Indian tax payers subsidize foriegn sugar consumers

Business Standard reports
White sugar fell to the lowest since November 2005 in London after India, the world’s second-biggest producer, agreed to subsidise exports of the sweetener.

The Election Commission approved a government plan to build a sugar stockpile and provide subsidies to exporters, a trade body said today. India will pay exporters up to Rs 1,450 ($34.50) a tonne for transportation costs to the ports, Agriculture Minister Sharad Pawar said March 29 in New Delhi.

Domestic sugar prices have fallen by more than a fifth in the past year because of record output, reducing local producers’ earnings. This prompted the government to lift a ban on exports in July to stop the prices from sliding.

Wednesday, April 18, 2007

Cement makers irked over lifting of addl customs, CVD

BL reports
The cement manufacturers have expressed concern over the Centre's decision to do away with countervailing duty and additional customs on imported Portland cement. However, the impact is likely to affect investor sentiment and capacity creation rather than encouraging imports, they say.

According to Mr Puneet Dalmia, Vice-President, Dalmia Cement (Bharat) Ltd, the decision brings down the price spread between imported cement and domestic product. The price difference is about Rs 25-35 a bag.

With the Government doing away with the 16 per cent countervailing duty, amounting to Rs 600 a tonne, the difference drops by Rs 30 and the lifting of additional customs duty means an impact of another Rs 1-2.

Effectively, the prices of imported cement and domestic cement are brought on par with each other. This could have some marginal impact on prices in the coastal areas, but prices elsewhere will not be affected because of the logistics cost. Another leading cement manufacturer based in the South said that it was regrettable that the Government had decided on the move despite cement prices being stable for the last month or two. It is the market that is deciding the prices.


Lowering trade barriers - such as bringing down import duties - is good. But it's better to be skeptical when government does it to control prices.

At the same time, look at how cement makers behave.

Some time back, the virtues of free market were so clear to them. When FM introduced a dual tax rate for cement, they all cried whats happening to free markets.

Now, when trade barriers come down, they say it's 'regrettable'.

Cement import: Makers must conform to Indian standards

Business Line reports
Overseas cement manufacturers intending to export have to obtain quality certification from the Bureau of Indian Standards (BIS) to the effect that their manufacturing units conform to Indian standards.

"Foreign manufacturers seeking to export cement to India will have to obtain a licence under the BIS Certification Scheme for their units," Mr P.K. Batra, Director, Central Marks, BIS, told Business Line.

The grant of licence by BIS is subject to an application to be made by the exporting manufacturer and the license is granted after personal inspection of the factory by a BIS official and satisfactory testing of samples in India.

The exporting unit will have to pay one per cent of annual export contract value to BIS as marking fees. This is in addition to a minimum marking fee of $2,000.

Tuesday, April 17, 2007

Drop prices or you’ll be made to, govt warns pharma firms

Mint reports
India could increase the number of drugs for which it fixes prices under the Drug Price Control Order (DPCO) from 74 to 354—the number of essential drugs according to the government—if pharmaceutical companies did not keep their promise to reduce prices, according to the Union minister for chemicals, petrochemicals and fertilizers, Ram Vilas Paswan.

Last year, the government had fixed the wholesale and retail margins on around 1,000 branded generics (off-patent drugs) at 15% and 35%, respectively.

The prices of these drugs are not determined by the National Pharmaceutical Pricing Authority (NPPA), which enforces DPCO.

The margins on some of these were as high as 1,000% before the government’s order, which was expected to result in a significant reduction in prices of drugs from October onwards.

Some of the companies hadn’t yet complied with this order, said Paswan.

State depts oppose move to centralize drug mfg licensing

Mint reports
The Union government’s proposal to create a Central Drugs Authority that will regulate and monitor the functioning of pharmaceutical companies has run into opposition from the drug departments of state governments, which believe the move will limit their own role.
The government’s move to create CDA—modelled on the Food and Drugs Administration of the US—will expand the powers of the current pharmaceuticals regulator, Drug Controller General of India or DCGI, and set up departments to monitor clinical trials, medical devices, vaccine and other drugs-related businesses. The CDA, awaiting parliamentary nod, will function under the ministry of health and family welfare.
These bureaucrats!

Indian planters urge Thai FTA plan rethink

Mint reports
Fears of concessional import of natural rubber from Thailand under the proposed free trade agreement (FTA) has caused a flutter in the rubber sector with growers and traders requesting the Centre to desist from any such move.

United Planters Association of South India (Upasi) president J.K. Thomas has, in a representation to the government, requested it to reconsider the move to allow cheap import of rubber from Thailand.

Thomas said he feared that the agreement would mean delisting rubber from the sensitive list which would bring down the present import tariff from 20% to 5%.
Indian Rubber Dealers’ Federation vice-president N. Radhakrishnan noted that Thailand is the largest natural rubber producer with an annual production of around 32 lakh tonnes. Both groups claim that the move would seriously affect the livelihood of small and marginal growers who account for 90% of the more than one million growers producing 8.03 lakh tonne of rubber annually.

Brass parts makers strike metal

FE reports
Nearly 3,000 brass part units in Jamnagar, Gujarat, will go on a symbolic one-day strike to protest the substantial surge in the prices of brass scrap, a key raw material used by the industry. Both at the London Metal Exchange (LME) and domestic commodity exchanges, the prices of brass parts have been constantly rising for the past four months.

Attributing speculative trading as the reason for the rise, brass parts manufacturers said that the prices of brass scrap have increased to Rs 270 per kg, from Rs 215 - Rs. 230 four months ago. Surprisingly, the prices were as low as Rs 80 - Rs 100 two years ago.

Govt mails bad news

FE reports
The government wants to reserve the right to carry letters, book post and parcels weighing up to 150 gm for its postal department. Private courier operators may be allowed to service this sector, but they will have to charge five times the postal department’s tariff for the same articles.

In a cabinet note on the proposed Indian Post Office (Amendment) Bill, 2007, the department of posts in the ministry of communications & IT has also said that in the case of urgent or exclusive mail services, courier companies will have to charge 2.5 times the Speedpost or Express Mail Services rates.

Monday, April 2, 2007

Export tax to conserve raw materials

PTI reports
Amid a threat of Chinese boycott of Indian iron ore due to the imposition of a Rs300-per-tonne duty on Indian ore exports, Finance Minister P Chidambaram on 29 March defended the measure saying it will “conserve” the country’s raw materials for domestic steel units.

“There is no controversy. As I said in my budget speech, it (the tax) is intended to conserve raw materials for our own steel industry and at the same time, create some revenues taking note of the fact that the prices are ruling very high,” Chidambaram said here after inaugurating the full-fledged branch of Bank of India, where the Communist giant initiated the Special Economic Zone (SEZ) for the first time.
If this is an argument, where is the end?

Govt plans Rs 550cr ad blitz for flagship progs

BS reports
There may be two years left for the general elections but the United Progressive Alliance (UPA) government is already planning a Rs 550-crore print advertising blitz for its flagship programmes like Bharat Nirman, Sarva Shikhsha Abhiyan and Prarambhik Shikhsha Kosh for this financial year.

This budget is more than five times the Rs 100 crore the BJP-led National Democratic Alliance government spent on its 2004 “India Shining” campaign and accounts for about 8 per cent of the total advertising spend by the corporate sector on the print media last year.

The publicity campaign will be created by the Directorate of Advertising & Visual Publicity (DAVP) under the Ministry of Information and Broadcasting (I&B).


Ads? For whom? Why? To win elections? To replace reality with images?

Reminds me of a passage from Milan Kundera's Immortality.
Communists used to believe that in the course of capitalist development the proletariat would gradually grow poorer and poorer, but when it finally became clear that all over Europe workers were driving to work in their own cars, they felt like shouting that reality was deceiving them. Reality was stronger than ideology. And it is in this sense that imagology surpassed it: imagology is stronger than reality.

Government, private firms and wheat

BS writes in an edit
The large corporations who are participants in the wheat trade have been informally requested by the Central government to not buy wheat from Punjab and Haryana. The context is that last year, firms like Cargill and ITC had bought up roughly 1.3 million tonnes, or 17 per cent, of Punjabs wheat output, by paying Rs 20 per quintal more than the price offered by the government. The legitimacy of the governments request is suspect, and various industries (cement, steel) have demonstrated in recent weeks that they are not about to panic because the government frowns on their pricing or other decisions. Everyone knows that the government has the power to order tight stocking limits for essential commodities thus forcing wheat supplies into the market. Still, can and (perhaps more important) should the government come in the way of a private transaction between two citizens of India?