News, leads and analysis related to India’s trade and all that’s happened on the policy front during the month of August 2014 Hyundai India Exports to Europe

India’s loss is Turkey’s gain

Workers on the assembly line at a car manufacturing facility

  Korean auto giant Hyundai Motors has announced that it will no longer export cars to Europe from India. Instead, it has decided to cater to the European markets from its plants in Turkey and the Czech Republic. The announcement is being seen as a blow to India’s ambitions of emerging as a major auto hub. It is also a major blow to the Chennai Port, which used to cater to most of the company’s exports. Hyundai India’s Chennai plant has a production capacity of around 6.8 lakh units/year and a big chunk of the total production was exported to the European market. A company official said the decision was made to meet growing domestic demand. Hyundai India has been India’s largest auto exporter, accounting for around 45% of India’s total car exports. The decision is expected to help the company save on transport costs and avoid import duties levied by European nations. However, the company claims that cars produced at the plant will continue to be exported to Latin America, the Middle East, Australia and Asia. It’s worth mentioning that Hyundai India started exporting cars from India in 1999 and its cars manufactured at its Chennai plant have been exported to around 120 countries across the world. India-China Free Trade Agreement

Wining and dining with the dragon

The Federation of Indian Exports Organisations (FIEO) has made a brave request. Pitching the idea that a free trade agreement (FTA) with China would actually be more beneficial to India than China, FIEO President Rafeeq Ahmed recently said, “Why are we afraid of China? If we enter into a FTA with China, it will benefit us. The government should not hesitate to talk about this. If Thailand can have an FTA with China, why not India? India should seriously look at this.” It’s worth noting that despite initiating the highest number of anti-dumping investigations, India’s trade deficit with China continues to spiral out of control – staying above $35 billion for each of the last three financial years. Rafeeq Ahmed’s recent statement assumes significance since there have been indications by the new government in New Delhi that India might take it easy when it comes to signing new FTAs. What’s interesting is that in 2012, FIEO had said that exports to countries with which India has signed FTAs, has shown a decline. The Department Of Industrial Policy & Promotion (DIPP) too has been opposing such pacts as they impact manufacturing negatively. Indian Tea Green Peace

As safe as its popularity

Following a recent sampling and testing of a variety of Indian tea products by Greenpeace to evaluate the level of residues of plant protection formulations, The Tea Board of India issued a press release, which said that all the samples tested comply with Indian laws and regulations. “Indian tea, which is very highly regarded all over the world, is totally safe and follow very stringent standards,” the release said. It’s worth noting that the Indian tea industry, led by the Tea Board of India, has been taking several steps to make tea cultivation more profitable and reduce reliance on synthetic plant protection products. It had recently organised a seminar that enabled Greenpeace to interact with the small tea growers. India-Australia Trade Uranium Exports

Only for the right reasons

Tony Abbott, Prime Minister, Australia

During his forthcoming visit to India in September, Australian Prime Minister Tony Abbott is expected to sign a deal to sell uranium to India. This follows multiple rounds of talks between Indian and Australian officials, wherein India managed to convince Australia that the uranium won’t be used to make nuclear weapons. Selling uranium to India is a politically sensitive issue in Australia as the former is not a party to the Nuclear Non-Proliferation Treaty (NPT). Opposing the move, Australian senator Scott Ludlam said, “Australia will be directly complicit in fuelling the nuclear arms race between India and Pakistan.” He also offered an alternative solution by which Australia could play a role in India’s fight against perennial energy crisis. “Instead of fuelling this arms race, the Australian industry should be partnering with India’s vibrant solar sector,” Ludlam added. It’s worth mentioning that India runs a massive trade deficit against Australia, mostly because of rising coal imports from the country down under.       Nepal Power Exports

‘Power’ in return for power

Attempts to tap Nepal’s hydro-power potential might get a setback following the opposition

  Ten Nepalese communist groups have joined hands to oppose a plan of the government of the Himalayan kingdom to sign a power trade agreement with India. Similarly, they have also made it clear that they are opposed to a project development agreement (PDA) involving hydro-power projects, including the Upper Karnali Project. “The government has agreed to sign both agreements within 45 days of Indian Prime Minister Narendra Modi visiting Nepal, giving monopoly to India on Nepal’s water and power development, which is objectionable,” they said in a joint statement. On the other hand, General Secretary of CPN-ML, which is a partner of the current coalition government in Nepal, P. Mainal said, “We are not against signing the deals with India but they should be done ensuring Nepal’s interests and on the basis of national consensus.” Estimates suggest that it is possible to generate 83,000 MW from Nepalese rivers, while the kingdom barely has a demand of about 1,000 MW – something that has not gone unnoticed by India. Indo-Pak Trade Gas Pipeline

For a brighter tomorrow, literally

[caption id="attachment_4583" width="650"] The ongoing negotiations might hit a roadblock after India recently called-off Foreign Secretary level talks[/caption]   India’s Minister of State for Petroleum & Natural Gas Dharmendra Pradhan has informed the Rajya Sabha that negotiations are on between GAIL and Pakistan’s Inter State Gas Systems (ISGS) as per which GAIL will supply five million metric standard cubic metres a day (MMSCMD) of lean gas to Pakistan for a period of five years. Under the proposal, GAIL will lay a 110-km pipeline from Jalandhar to Amritsar/Atari border. Details related to the technical feasibility of laying the pipeline to Lahore from the Atari border has already been assessed by both the parties. The project discussion will also include commercial aspects. While Pakistan has been negotiating with India on the pricing front, India has sought sovereign guarantees from the Pakistani government. If negotiations work out, GAIL is expected to procure imported liquefied natural gas (LNG) at Jalandhar from its terminals in Maharashtra or Gujarat. It’s worth noting that Pakistan currently doesn’t have LNG import facilities.   Narendra Modi Make in India

For exporting out of trouble

[caption id="attachment_4585" width="250"] Narendra Modi, Prime Minister, India[/caption]   In his first address from the ramparts of the Red Fort, Indian Prime Minister Narendra Modi has invited companies from around the world to setup manufacturing facilities in India and export goods around the world. During his speech on Independence Day, Modi said, “Come, manufacture in India. Sell in any country of the world but manufacture here. We have got the skill, talent, discipline and the determination to do something.” A few days after the speech, he addressed a conference of Board of Governors and directors of Indian Institute of Technologies and urged them to help in the manufacturing of those goods on which India is heavily dependent on imports. “I refuse to believe that India does not have the talent to make these things,” he said, asking the IITs to take up the challenge. The growing desperation in the voice of the Indian premier to increase exports and reduce imports is being seen as a repercussion of India having trade deficits of over $100 billion for the last several years. In fact, for the last several years, Indian trade deficit continues to be one of the highest in the world, behind US and Hong Kong. Safeguard Duty Pipes & Tubes Imports

Safeguard or protectionism?

  India has imposed a safeguard duty on imports of seamless pipes and tubes. The decision was taken after thorough consideration of a petition filed by Jindal Saw Ltd. and ISMT Ltd., seeking imposition of safeguard duty on imports of tubes, pipes and hollow profiles made of alloy or non-alloy steel. The petition claimed that increased imports are causing and/or threatening to cause serious injury to the domestic producers. The petition was also supported by Maharashtra Seamless Ltd. (MSL). The Director General (Safeguard) arrived at the decision after hearing the pleadings of the petitioners and importers. It’s worth noting that oil & gas companies like ONGC have been given special licenses by the Director General of Hydrocarbons to import seamless pipes and tubes at ‘nil’ customs duty, when imported to specific areas. The government, after considering the findings of the Director General (Safeguard), imposed the duty via Notification No. 02 /2014-Customs (SG). The safeguard duty will be imposed at a rate of 20% in the first year (if imported between August 13, 2014 and August 12, 2015), 10% in the second year (if imported between August 13, 2015 and August 12, 2016) and at the rate of 5% in the third year (if imported between August 13, 2016 and February 12, 2017). This notification shall apply to imports of Seamless Pipes and Tubes from countries notified as developing countries under clause (a) of sub-section (6) of section 8B of the Customs Tariff Act, other than the People’s Republic of China. Advance Authorisation (AA)/DFIA Amendment in FTP - Notification 31

A move sans logic?

  For over a year now, many processed food exporters in India were hoping that they would be relieved from the rather unnecessary noose that was forced around their necks in August last year in the form of Notification 31. [The notification allowed duty free imports of “only” inputs that were actually used in manufacturing the export product.] It was hoped that the notification that enforced non-transferability of authorisation or duty free inputs against it – which was in direct conflict with para 4.2.6 (“Transferability”) of FTP – would be revoked. What occurred on August 21, broke hearts. The new notification (No. 90; RE-2013/2009-14) imposed a limit on even the ‘quantity’ of input to be allowed under DFIA/ AA (in proportion to the quantity of inputs actually used in production). Of more significance than the very notification is the fact that it indicates the intentions of our August group of policymakers, and right before the new FTP is to be released. Looks like the Notification 31 nightmare will continue to haunt exporters. Sugar Imports Hike in Duty

Between a rock and a hard place

Coming to the rescue of Indian sugar mills, which are struggling to clear sugarcane arrears due to low prices and excess stock and now sugar surplus in global markets, the government has hiked the import duty on sugar to 25% from 15%. This comes a couple of months after Food Minister Ram Vilas Paswan first indicated that the duty could be hiked to as high as 40% if the situation doesn’t improve. It is believed that prices of sugar in global markets are currently trading well below the production cost of sugar in India, thanks to a surplus sugar production in many sugar producing nations. Like most other agri-commodities, sugar continues to be highly regulated in India, with political interests ensuring high minimum support prices (MSPs) that, often, lead to production costs ending up way higher than the prevalent market price for sugar.