Dates-A Date with fortune and profits March 2018 issue

Dates-A Date with fortune and profits

India’s rendezvous with dates began ages ago, but it has been more of a love and hate drama. Today, we are the world’s largest importers of dates, and one may wonder how we are able to keep up with the ever-growing market demand for this delectable fruit. The credit goes to the zealous importers, who write the mouth-watering script for us! The Dollar Business explores what happens behind the scenes.

Andres M. Molier | September 2016 Issue | The Dollar Business

What would you prefer – Khajur or Kharek? These are the popular Hindi names of two different types of date (or date palm). While Khajur is wet, Kharek is the dried variant. It’s not known as to when and how the fruit migrated to India, but today, it can be found in almost every home across the country, especially during the festive season. As per the historians, dates have been a part of our culture since 4000 BC.
Known as the fruit of heaven, they come in different shapes, sizes and colours, and each type has its own unique taste and flavour. Today, there are over 2,500 species of palm trees in the world. Not all palm trees can bear edible fruits. In India, around 160 species are grown for various purposes.
Depending on the species, a mature tree can produce about 68 kg to 170 kg of fruit annually. While the larger species can grow up to 75 ft. and their leaves can stretch up to 20 ft., the smaller ones, about 3 ft. tall,  are usually treated as decorative plants.

Wealth of health

Offering an unbeatable combination of versatile utility and numerous health benefits, dates have cast their spell on most Indians. Nutritionists and doctors often advise their patients to consume dates, as they help to strengthen bones, keep the nervous system energised, improve digestion and keep cholesterol under control. Dates also come handy to keep the medical conditions – such as night blindness, hyperacidity, obesity, dehydration, paediatrics anxiety, skin allergy and tumours – at bay. It can also be an excellent antidote to ease a hangover!

Wet and semi wet dates are mostly

The Indian parlance

India is the largest importer of dates in the world, followed by Morocco; however, the usage of the fruit is rather different in both the countries. In India dates are consumed as dry fruits while in the Middle East and African countries they form a part of the cuisine and is used to make pastries and other delicacies.
Although never widely cultivated in India, dates have a fair share of myths and religious connotations attached to them. For instance, in Hinduism, it is widely believed that the dates symbolise prosperity, happiness and love. Perhaps, that’s why they always get to share space with other sweets in a gift box. Christians and Muslims too adore the fruit because of its religious significance to them.

For the record, this year, dates worth Rs.15 crore were consumed during Ramadan in the Kashmir valley alone. In India, Mumbai, Hyderabad, Lucknow, Delhi, Bengaluru, Kerala, West Bengal and Srinagar are the most lucrative markets for the sale of dates.

No date for dates

Date cultivation in India is restricted to certain regions, with Gujarat topping the list as the largest grower. Of late, Rajasthan and Maharashtra have begun to cultivate them, but these states are yet to reap the benefits. And down south, Tamil Nadu and Kerala are also slowly emerging as key date cultivators. However, Nizamuddin, a date grower in Karur District, Tamil Nadu, says, “The state government is not paying adequate attention to date cultivation. Being farmers, we are used to price fluctuations or the difficulty in finding the right buyers, but, our biggest difficulty is in availing subsidies from the government for expanding our farms.”

Shiv, a farmer from Dharmapuri in Tamil Nadu, who says that he remains idle for most of the year except during the harvest season, shares a similar story. “The government must take note of domestic demand. Amidst several high-octave government campaigns emphasising the idea of manufacturing home-grown products, we often feel that there is a lack of support for our sector. I cannot even buy saplings because they are too expensive. The sooner the government brings date cultivation under the periphery of horticulture, the better it will be for us,” he tells The Dollar Business.
Meanwhile, farmers in Gujarat and Rajasthan count themselves lucky, as they get patronage from their respective governments. These states provide a subsidy of 90-100% to buy saplings.

Apart from the government apathy, the date farmers also face some critical climatic challenges. India, a tropical country, is not best suited for date cultivation, and the country, according to Nizamuddin, lacks modern technology. “The sole date dryer is in Gujarat. And being based out of Tamil Nadu, it’s very difficult for us to utilise that facility. Monsoon usually starts right at the time when dates start to ripen, and since I have no means to dry them, I am left with no other option, but to watch them rot sometimes,” he says.

Also, as the Central government has been a little too harsh on the importers of date plants, their business has been stagnant for the last eight months. “We import tissue-cultured palm saplings. Just when we thought we are on the growth path, we had to stop our business. The Centre has imposed strict norms which we find hard to comply with,” rues Nazzar Mohammad, a date scientist and importer from Karur District in Tamil Nadu. Tissue-cultured palms are nurtured in labs for three years, hence they are expensive and can cost between Rs.3,000 to Rs.3,500 per sapling. However, they can yield up to 200 kg fruit per tree annually.

As far as the domestic yield is concerned, good quality dates are being grown in Tamil Nadu, Kerala, Rajasthan, and Gujarat. If the government promotes date cultivation, India can eventually start exporting. Instead of spending valuable foreign exchange on import, the country can strengthen its economy by earning moolah through date export. However, considering the current situation, this looks like a distant dream. And, of course, a good news for its importers.

Smooth transaction

Keeping aside the FSSAI (Food Safety and Standards Authority of India) norms that both exporters and importers have to adhere to, the international date trade has been, more or less, hassle-free. Abdul Qayoom Memon, the owner of GNS, an export house in Karachi, Pakistan, states, “Pakistan’s exports volume to India is huge, as both are geographical neighbours and there is no major hurdle in doing business. However, India’s demand for dates is very different from other parts of the world. The Indian market demand is mostly for dry dates, for direct consumption.”

Dates exports from Pakistan, the biggest source of India’s date imports, to India in FY2015 and FY2016 were worth $98.38 million and $87.98 million, respectively. The reason is simple! Pakistan is a neighbour and produces about 550,000 MT to 650,000 MT of dates every year in its 92,300 hectare of cultivable land. Memon continues to elaborate, “Aseel, a type of date, which grows abundantly in Pakistan, is the most exported species to India.” Aseel comes in four grades: lower, chalu, medium and good, and the price starts from 45 cents to a dollar per kilogram.”

Interestingly, except for regular maintenance of farms, exporters have to endure the long winters. The fate of their business is always determined by factors which are beyond their control, such as climate change. However, summers bring the business back on track. Muhammad Sajid, another Pakistani exporter, who own and runs Abdul Sattar Sons in Multan, Pakistan, says, “Every year, we export about 1,000 MT of fresh and dry dates to India. Grades and species are very subjective, but, so far, it has been a hassle-free experience dealing with Indian importers. While some of the consignments are channelised through the port in Kolkata, most of the trade is routed through the Wagah border.”

Seasonal. Is it?

India’s imports of dates mainly comprise three different types: soft, semi-dry and dry. In FY2016, the country’s total date import touched 324,350.23 MT in volume terms, which was worth $190.13 million. Roughly 96% of the country’s total import comes from Pakistan, Iraq, Iran, UAE and Oman, with Pakistan being India’s largest date trading partner.

Despite high import figures, dates as an import product is not necessarily a money spinner. Chandrashekhar Yadav of EKA International, Mumbai, says, “It may not be an extremely lucrative product category as it offers only about 7 to 10% margin on overall investments. The margin does go up during Ramzan, only to dip after that.” During Ramzan, the sales of imported premium quality dates go up by 50 to 75% in India. M. Asim Ansari of Hyderabad-based Asra Enterprises also holds a similar opinion. “Most of the time, we run the business on losses. Of course, during the festive season, sales do shoot up, but this is a product where demand and supply equilibrium is unpredictable,” he says.

Furthermore, transport and warehousing costs are a big challenge for the majority of importers, especially those who run business far from the seaports. Importers also have to bear the cost of screening the consignments to ascertain that the product is in good condition. In addition, they have to pay charges to APMC (Agricultural Produce Market Committee), if running business through their premises, and to agents and middlemen to market the products, and ensure that the entire stock is sold off before reaching the expiry date. The agents usually charge a minimum of 8% commission, which eventually eats off an importer’s profits.

Consumer’s lack of understanding and awareness of the fruit is also a huge disadvantage for importers. Ahmad Khan, an independent date trader from Delhi, says, “The demand is healthy, but buyers’ understanding of dates is very low in India. Sometimes, I try to explain the differences in colour, taste, texture, size, shape, smoothness, place of harvest and more, but generally, it does not work. Except for some niche customers, everybody wants the lowest price. However, they become more or less convinced when I say the dates are from Afghanistan, and it works for my business.”World’s largest exporters of dates

Make Hay as it rains

For the last decade, imports of dates have been growing at a CAGR of 6.76%. And, if the development in our agricultural sector is anything to go by, it’s very unlikely that domestic production will meet the market demand – leave alone the quality. While in Q3, CY2015, there was a sharp decline in imports (dropped from 69,015.95 MT in Q2, CY2015 to 39,373.32 MT in Q3, CY2015), imports of dates clocked a dashing 109,888.80 MT in Q4, CY2015. The first quarter of CY2016 saw date imports of 95,314.14 MT worth $52.41 million and the market experts expect that importers will make a decent margin in the next quarters. And if the spell of monsoon continues the way it is as of now, domestic production is bound to go down, leading to importers making hay while it rains.
Being a seasonal fruit, dates do not enjoy round-the-year business. Imports of fresh and wet dates slow down after the harvesting season. In fact, the business grinds to a halt for traders who do not have refrigerated storage facilities. Interestingly, this year, since harvesting is being delayed across the world, and will start only in September, exporters and importers of dates stand to enjoy a prolonged trade window. The change in the cycle is expected to cause a dip in the price of dates in the country of origin but not in India. With the product already in short supply, it looks like date importers this year will have suitors and a resultant considerable levels of profits!


“Price depends on the harvest in Middle East”


M. Asim Ansari GENERAL MANAGER, ASRA ENTERPRISESM. Asim ansari General manager, Asra enterprises

TDB: Which countries are your biggest source of date imports? And how many varieties are you importing currently?

M. Asim Ansari (MAA): We import from Iraq, Iran, Saudi Arabia and Algeria. Although Pakistan is the largest exporter of dates to India, we don’t deal with them because of the consumption pattern in South India. We import four major types of dates, viz. Zahedi from Iraq, Mazafati or Kimia from Iran, Deglet Nour from Tunisia and Algeria, and Burni (vacuum packed) from Saudi Arabia. Zahedi is the most common variety sold in India because it is inexpensive, and depending on the quality, packing, colour and age of the dates, it can cost anything between Rs.38 and Rs.68 per kg. Usually, Deglet Nour is the most expensive variety of dates. But this year, Mazafati has become quite expensive because of its below par harvest.

TDB: You mentioned the ‘consumption pattern’. How does it work in India?

MAA: If we look at the consumption in terms of price, any date that is below Rs.150 per kg comes to South India, and those which cost above go to North and West India. However, it doesn’t imply that cheaper varieties aren’t consumed in North or West, or there is very low consumption of expensive dates in the South. On a lighter note, a huge South Indian diaspora lives in the Middle East, so they must be sending the best dates back home for their near and dear ones. Also, South Indians prefer wet and semi-wet dates, whereas people in the West and North like them dry. The wet dates are sourced from Middle East, while Pakistan is India’s biggest source of imported dry dates.

TDB: As an importer of dates, i.e. a food product, how difficult is it to comply with the Food Safety and Standards Authority of India (FSSAI) norms?

MAA: There are hundreds of FSSAI norms that an importer like us has to follow. Apart from the major rules, we have to ensure that each packet has packaging and expiry dates, the name of the exporter, and the declaration whether it’s vegetarian or non-vegetarian, etc., printed on it. Since the exporters from countries like Iraq and Iran are not conversant with our processing requirements, we have to be extra careful.
TDB: How smooth has the import process been for you so far?

MAA: It has been hassle-free throughout. Other than Customs duties there aren’t many hurdles. Though, three years ago, the government had cut down the imports duty on dates, there is a scope for slashing it further. Other than Customs duties, we have to pay 5% VAT on sales in India.

TDB: Do you face any problem on logistics and warehousing fronts?

MAA: Apart from costs incurred, not really! Once the containers reach Mumbai seaport, they are brought to Hyderabad through refrigerated trailers, which cost about Rs.80,000 to Rs.1,00,000 for a 40 feet-long reefer container. But that’s only for wet dates because dry and semi-dry dates can be transported on normal trailers, which roughly cost Rs.50,000 per container. We are now working our way towards reducing these high transportation costs. As regards warehousing, we have to maintain a temperature of 5°C  in our warehouses throughout the year. So, including labour, electricity and other charges, logistics cost works out to somewhere around Rs.1.50 to 1.75 per kg.

TDB: How does the perishable nature of date affect its trade?

MAA: The best-before-use duration for semi-dry and dry dates is 18 months, and for wet dates, it’s about 9 to 12 months. Since we have to sell them within the expiry date and are dependent on market demand, we have to compromise on the margin and sometimes bear losses.

TDB: And how volatile are date prices?

MAA: Price fluctuates every week, as everything depends on the demand and supply ratio. Most people perceive that the fluctuation is triggered by the festive season, but it actually depends on the yield in Middle East. For instance, this year, the date price is still high even after Ramzan because of delayed harvesting in Middle East. This year, fresh dates will reach India around September. And usually, the price fluctuates between $50 and $100 per metric tonne (MT).


“Competition is eating into our profit margins”


Vijay Bhuta President, Mumbai Dry Fruit & Dates Merchants Association

TDB: Why have margins in date trade come down over the last few years?

Vijay Bhuta (VB): Import of dates has become a low-margin game because of the growing competition. Some 25 years ago, the old dry fruit market in Masjid Bunder in Mumbai had only five traders. But today, the new APMC dry fruit market located in Navi Mumbai boasts of as many as 200 traders. In addition, the proliferation of online market platforms actually is eating into our margins, as it has added to the reach and penetration of the business in a cost-effective manner.

TDB: So, how has the trade shaped up over the last few years?

VB: When we were under APMC (Agricultural Produce Market Committee) regulation, we were allowed to buy and sell our goods only within a designated area. The date market is now no longer under APMC. With the introduction of OGL (Open General License), anybody can import from any part of the world. Although this helps increase sales, it also breeds malpractices. The best part of the development of communication is that suppliers are now aware of the daily market rate. As dates are perishable in nature, there is a huge cost implication involved in warehousing the stock. Earlier, traders used to finalise the annual import orders in August. But now, due to competition, after securing the first order, it’s difficult to procure the following month’s order. So, we now largely order in small portions and that impacts the margins.

TDB: How good are the domestically grown variants of date?

VB: There are reports that Gujarat, Tamil Nadu and Rajasthan have started date cultivation. But, wet dates cannot be produced in India. On the other hand, dry dates are a processed item and can be grown locally.

TDB: How do you see taxes levied on trades conducted in APMC markets?    

VB: India’s dry fruit market, excluding cashew nuts, is completely non-regulated. Earlier we used to pay 80 paisa
per transaction of Rs.100 as cess, but things are quite different now. According to the new regulation, APMC cess is only levied on merchants doing business within the APMC periphery. Although this cess doesn’t affect our margin at the moment, it may pose a problem in the future.

TDB: In 2003, you were vociferous against the imposition of VAT. How do you see the passing of the GST bill? Do you have any concern?

VB: Back in 2003, 12.5% VAT was eating into our margins. But after a lot of negotiations with the government, we got it reduced to 5.5% in Maharashtra. Any new tax is a challenge in itself for unorganised trade when it comes to compliance. However, our association will definitely address the issues arising out of the new tax regime.

TDB: Are there any specific Customs related sops for importers of dates?
VB: There is a duty concession on imports from SAARC countries. Overall, Customs policies are not a challenge.