News, leads and analysis related to India’s trade and all that’s happened on the policy front during the month of November 2015 India-Germany Modi-Merkel Meet

On the fast track!

Hailing Germany as a ‘natural partner’ of India, Prime Minister Narendra Modi signed 18 MoUs (memorandum of understanding) with German Chancellor Angela Merkel during the latter’s recent visit to India. After holding long talks, both the countries signed deals including the one on setting up fast-track system for German companies to operate in India. In order to ensure German investment, Indian government has decided to create a “fast track clearance mechanism” to ensure that German companies only have one point of contact with Indian officials, while avoiding multiple bureaucratic barriers. The only other country to enjoy such a facility in India is Japan. The fast track system will be taken care of by the Department of Industrial Policy and Promotion (DIPP), and will start by March 2016. Both sides also inked pact on clean and solar energy, ahead of crucial UN Climate Change talks later this year. Germany has agreed to aid a billion euros for India’s green energy corridor and solar projects. It is worth noting that Germany is already India’s one of the biggest trading partners, with the bilateral trade between the two crossing the $20-billion mark in FY2015.

  Panasonic Carbon Doubling Exports

Getting charged up

] Panasonic Carbon India is the biggest carbon rod manufacturer in India and exports half of its production to Panasonic Group factories across the globe.

Panasonic Carbon India (PCI) Co. Ltd., in which Japanese electronics giant Panasonic Corporation has a majority stake, is eyeing to double its exports from India. The company, which is one of the biggest suppliers of primary consumer batteries and perhaps the lowest cost producer of carbon rods in the world, is targeting to make Indian operations a major hub for international clients. At present, PCI is the biggest carbon rod manufacturer in India and exports half of its production to Panasonic Group factories in Poland, Thailand, Costa Rica, Indonesia and Peru. It is worth mentioning here that the company sells half of its production to Panasonic Group companies across the globe. Further, the Japanese major sells over three billion zinc-carbon batteries every year across various emerging markets such as Africa and Latin America.

  Apple Import Restriction

No more the Apple of your eye!

Love eating apples? Then, there’s a bad news for you! Your favourite fruit might no longer keep you away from the doctor for it is soon going to cost a bomb to you. Courtesy, a recent notification by the Director General of Foreign Trade (DGFT) that restricts the imports of the fruit into India only through one port – Jawaharlal Nehru Port, also known Nhava Sheva, in Navi Mumbai. The government’s move – which it claims is aimed at promoting Indian apples and protecting domestic growers in Kashmir and Himachal Pradesh - is likely to make the fruit dearer to consumers across India. Since apples are shipped in refrigerated containers, restricting their imports to just one port will lead to delays in clearance apart from increasing the handling charges and logistics costs, ultimately enhancing the price of the fruit. It is estimated that buyers will have to shell out at least Rs.50-80 per kg more than they do now. There is also a serious concern about the consignments coming through Nhava Sheva as all the three terminals at the port have reached their stated capacities. Congestion at the port may add to delays in clearance of the fruit, leading to a decline in the quality. The DGFT’s notification is also expected to hit business at other ports across India.

  Ghee & Butter Import Duty Hike

Fair play or protectionism?

] The import duty on ghee butter and butter oil has been increased from 30% to 40% and the hike will be valid till March-end next year.

The government, it appears, has become protective about the domestic producers and products made within the country. For, after steel (the government had recently imposed 20% safeguard duty on hot-rolled steel in order to curb its imports and protect domestic steel manufacturers), the government has raised import duty on ghee, butter, and butter oil by 10%. The government claims the decision was taken to safeguard the domestic dairy industry following a steep decline in the global prices of milk and milk products. The move comes as a much-needed relief for the domestic dairy producers who had sought duty protection in the wake of a glut in international commodity markets. The revised duty, which stands increased to 40% from 30% will be in force till March 31, 2016. Experts feel that this duty hike will help the Indian dairy industry maintain the standard of their products at par with their overseas competitors.

  India-Iran Priority Status

Returning the favour

India’s biggest export to Iran continues to be basmati rice, with over $1.1 billion worth of exports in FY2015.

In a symbolic payback gesture for India’s solidarity during tough times, Iran has accorded a high priority status to the former for trade and investment. India was among the three countries – including Turkey and China - that continued to trade with Iran when United States and the 28-nation European Union had imposed sanctions on it in FY2006-07. Rice, sugar, textiles were among the commodities exported from India to Iran during the sanctions. New Delhi, on the other hand, imported crude oil in large quantities. In FY2014-15, while India’s exports to Iran stood at $4.17 billion, imports from Iran amounted to $8.95 billion, up from $1.44 billion and $7.61 billion, respectively, during FY2006-07. The two countries are likely to have a joint consultative meeting in January 2016 to thrash out details of the proposed engagement. It should be noted that Prime Minister Narendra Modi, during his visit to Iran in August this year, reiterated that “India attached high priority to its relations with Iran.” Iran, after signing the nuclear deal with US, is expected to renegotiate trade terms with India.

  Indian Banks Money Laundering

Skeletons tumbling out of closets!

The alleged Rs.6,172 crore funds fraud in Bank of Baroda (BoB) has surfaced the irregularities and violations of the anti-money laundering rules in the country. And with the latest scam hitting the headlines, more skeletons are tumbling out of closets of the country’s top banks. The BoB scam is all about the alleged illegal remittance of about Rs.6,172 crore from one of the bank’s branches in New Delhi to Hong Kong using provisions such as pre-payment for imports of dry fruits, rice and pulses. The bank noticed Rs.350 crore bill discounting irregularity and initiated an investigation into it and alerted the government agencies. The case has been termed as a trade-based money laundering, where accused traders evaded custom duties and taxes to generate slush funds, and bank admitted that the branch did not adhere to FEMA (Foreign Exchange Management act) norms. During the investigations the Enforcement Directorate (ED) unearthed another scam, where Rs.550 crore were transferred overseas through Oriental Bank of Commerce (OBC), Axis Bank, ICICI, IndusInd, Kotak Mahindra, DCB, Dhanalaxmi Bank and YES Bank. Earlier this year, the ED had busted a scam of fraudulent foreign remittances worth Rs.15,000 crore, involving a number of dubious importers who deposited fake bills of imports and remittances were made to people outside India. It must be recalled that two years ago, an online magazine Cobrapost had carried out a sting operation and released secret recordings of senior officials of 23 banks and insurance firms, alleging that three major banks were involved in channeling ‘vast amounts of black money into the regular banking system as laundered white money.’ The recent forex scam once again raises concerns on how Indian banks are not paying enough attention to check violation of anti-money laundering rules.

  Megafine Pharma Fda Ban

Not in the pink of health

Mumbai-based Megafine Pharma’s Nashik plant became the latest site to face the heat of the US Food and Drug Administration (FDA) for inadequate manufacturing standards. The US health regulator banned the company’s Maharashtra facility from sending the products to US, making it the 11th site in the country this year to face FDA ban. The action takes the total number of Indian drug manufacturing sites barred from exporting drugs to US to 45 since 2011 and now. The development comes a month after FDA banned Mumbai-based Polydrug Laboratories Pvt. Ltd’s Ambernath manufacturing plant for non-compliance of manufacturing norms. Over the years, FDA has banned several Indian drug makers over issues such as poor sanitation, inadequate lab testing, violating standard manufacturing norms and manipulation of data etc. Besides manufacturing active pharmaceutical ingredients (APIs), Megafine also contract manufactures drugs for generic companies and global drug discoverers.

  Meis Increased Allocation

The need for a booster dose

Concerned over the contracting exports, the Commerce Ministry has agreed to partially revamp the Merchandise Exports from India Scheme (MEIS), allocating another Rs.3000 crore to the scheme to boost shipments. In a meeting with 27 export promotion councils, in the wake of falling exports, the government decided to increase the incentives to ailing exporters and thus raised allocation under MEIS in the current financial year from Rs.18,000 crores to Rs.21,000 crore. Citing changing dynamics of the export markets, exporters have been asked to ensure the timely submission of bills in order to gain the extra credit. However, the government said that any more benefits to the exporters were not possible. It must be noted that India’s merchandise exports dropped for a 10th straight month and by nearly a quarter in September from a year ago.