India is unquestionably known for its exports of frozen shrimps and prawns. However, there is another category of seafood product that is fast gaining recognition the world over – cuttlefish and squid. This category is already contributing 5% to India’s total seafood exports basket. The Dollar Business measures the export potential of these sea-food items.
By Anishaa Kumar | July Issue 2017 | The Dollar Business
Can you name a dish made from cuttlefish or squid? Probably not. That’s because these items have never traditionally been a vital part of Indian cuisine. They perhaps will never be. Well, some authentic Spanish, Italian or Thai restaurants serve cuttlefish and squid even in India, but frankly speaking, India is not the best market to promote these products. On the contrary, if you speak with the Spaniards, Italians, Thais, Vietnamese, or even Americans, they will tell you that cuttlefish and squid are delicacies in their home countries. And they are also the largest importers of these seafood products.
Numbers don’t lie
Seafood, including squids and cuttlefish, play an important role in the Indian economy as it generates an enormous amount of employment in our coastal states while also contributing big time to the country’s exports. For the record, National Fisheries Development Board reports that India ranks third in fisheries and second in aquaculture in the world. And together, they account for roughly 1.07% of the Indian GDP.
As for the export of cuttlefish and squid, the number may not be on par with those of frozen shrimps and prawns – which India is widely known for. But on the positive side, the potential for growth in this segment is huge.
China is no doubt the big daddy when it comes to exports in this segment, clocking over $2.23 billion in CY2016. However, India’s growth has also been meteoric. Between FY2016 and FY2017, India’s exports of cuttlefish and squid leaped by 59.33% with exports touching $504.97 million in FY2017.
“Cephalopods, including cuttlefish and squid, are one of the major seafood export items from India. During FY2017, frozen cuttlefish and squid accounted over 5% (by value) of the Indian total seafood exports. And in terms of volume, the two accounted for 9% and 7%, respectively, of the seafood export basket,” explains Dr. A. Jayathilak, Chairman, Marine Products Export Development Authority (MPEDA).
Vietnam, Spain, Italy and Thailand are India’s main export destination. And while squid is slowly finding its way into the domestic market, cuttlefish remains an export-only product.
Unexplored corners
A discussion on exports simply cannot begin without referencing to the elephant in the room, China, which is the largest exporter of cuttlefish and squids in the world. Interestingly, the country is also the fourth largest importer and the largest consumer of cuttlefish and squids in the world. Despite India being the second largest exporter of the product in the world, there is absolutely no way India can presently compete with China. The reason - Indian exporters are constrained by many factors.
Ashok Rama, a Goa-based fishing consultant explains, “India has exhausted almost all its resources in the shallow waters. While other countries have been exploiting our territorial waters for years, we do not have the resources or infrastructure to explore our own natural deep sea resources.” China has been, for long, fishing in the deep sea, which puts them at an advantage as not only are the catches large, the deep waters also offer a wider variety of marine produce.
Muhammad Ashfaq Dandia, Proprietor of West Coast Foods, a Porbandar-based seafood export company, emphasising on the importance of the catch size says, “The catch determines the market price. When the catch is low, the price goes up and vise versa. So, it is difficult for Indian exporters with small catches, to compete with countries that offer the same product at a lower price.”
PROTOCOLs
Despite the growth in exports numbers, there are some regulatory hurdles that exporters, both old and new, must deal with. EU is the main market for Indian cuttlefish and squid – for the record, in FY2017 almost 70% of India’s exports of cuttlefish and squid went to EU. And EU has stringent rules when it comes to health & phytosanitary requirements for seafood produce. In fact, the requirements are so stringent, exporters say only 50% of the inspected cuttlefish and squids from India reach EU market.
Dandia explains, “Unlike China, which has slightly lenient regulations, there are a lot of regulations in Europe, which can get cumbersome. But one must remember that these challenges are a part and parcel of the business and we cannot change the process.” Exporters must get proper health certificates either from Export Import Council (EIC) or agencies approved by EIC. However, some traders allege that authorities in EU have at many instances rejected shipments despite producing the certificate.
Further explaining the situation, Jayathilak says, “The sector has been facing increased sanitary and phytosanitary measures (SPS) and technical barriers to trade measures (TBT) in many overseas markets. This adds to our production cost and causes delays.” Jayathalik, however, assures that MPEDA is closely working with Ministry of Commerce and Industry to tackle such issues through bilateral negotiations.
Alongside, to provide consistent seafood products, MPEDA has established Enzyme-Linked Immunosorbent Assay (ELISA) Lab facilities in the coastal states. These labs conduct pre-harvest screening test of banned antibiotic substances, a means to standardise quality. “Exporters can approach the council for consultation for quality control at any point in time,” adds Jayathilak.
Logistical Hurdles
Indian exporters are also challenged by the lack of transportation and proper warehouse facilities. Seafood being a perishable item, temperature-controlled climate chambers and trailers are crucial for the industry. Indian Council of Agricultural Research (ICAR) reports that in FY2015, marine products faced about 10.52% post-harvest losses.
Also, some exporters feel that the cost of packaging has been on the rise because there is no standardised protocol and it varies from buyer to buyer. But the main pain for most exporters is the price of electricity. “Electricity cost is one of the main overhead costs for us because seafood has to be kept in cold storage round the clock,” explains Rama.
With a little help...
Despite numerous obstacles facing the sector, an exporter can earn a 3-5% margin – depending on the global demand and market price. Also, the government provides a 5% incentive under the Merchandise Exports from India Scheme (MEIS) to exporters of cuttlefish and squid. In addition, there is a 2.7% duty drawback available on the product.
MPEDA alongside providing financial assistance also offers various training programmes to technologists. It also has outreach organisations such as Network for Fish Quality Management and Sustainable Fishing (NETFISH) and National Centre for Sustainable Aquaculture (NaCSA) to impart training to farmers, manufacturers, exporters and those involved in the industry to improve quality of the product. 
While squid is slowly making an entry into Indian cuisines, especially in the South, Cuttlefish
remains an export-only product with Vietnam and Spain being India’s biggest export markets.
A Sea of Potential
Despite the many challenges, the industry has been continuously attracting entrepreneurs. Perhaps what Indian exporters of cuttlefish and squids needs to now learn is the art of value addition from their South-East Asian counterparts in Indonesia and Malaysia. “Indian exporters need to focus on value addition to sustain growth,” agrees Jayathilak. Importers across the globe also need to be made aware that Indian fisheries too can produce high-quality products.
Once Indian exporters start exploring more of the deep sea alongside practicing sustainable aquaculture, they can easily give Chinese a run for their money in this segment. There is a vast sea of opportunities in front of them. And all they need to do is take the plunge!
TDB: How has India’s exports of cuttlefish and squid been over the last couple of years?
Dr. A. Jayathilak (AJ): Cephalopods, including squid and cuttlefish, are one of the most exported seafood items from India. During FY2017, frozen squid and cuttlefish contributed 5% to India’s overall seafood exports by value. While most of the produce is exported to EU and South East Asia, we have now identified Kazakhstan, Dominican Republic and Martinique as emerging markets for Indian cephalopods.
TDB: How has the industry evolved over the years?
AJ: Indian fishing industry has grown considerably, both in efficiency and by value. However, research indicates that the catch per unit effort (CPUE) is stagnating in certain fisheries. In such cases, we need to take action to reduce the fishing pressure and sustain the resources. Mechanisation has helped in increasing the catch from the sea apart from promoting distant water fishing, bringing in more varieties of fin fishes and shell fishes. As the production from the coastal waters remains constant, the country needs to venture into deep waters to increase the marine catch, tapping under-exploited resources like oceanic squid. It is also important for us to have better reporting of the catch for traceability as it impacts exports.
TDB: China is way ahead of India when it comes to exports of cuttlefish. How is the industry making itself more efficient and competitive?
AJ: Fisheries in India are embracing better management practices (BMP) for sustainable development of the industry. In addition, an increasing number of aquafarming systems are receiving international certifications, which add value to our export products in the global market. This trend along with quality seeds, process automation, complete biosecurity and disease surveillance shall bring in higher returns to the sector. The available resources must be explored while taking care of conserving the ecosystem. We must also reduce post-harvest losses. Developing infrastructure and enhancing skilled manpower will also strengthen the sector. Value addition will help the sector earn more forex and support more employment generation.
TDB: What initiatives is MPEDA taking to develop the industry?
AJ: MPEDA helps exporters participate in major international seafood fairs – such as Seafood Expo Global in Brussels and Seafood Expo in Boston – to promote and market Indian seafood. And when we receive trade enquiries, we pass them to exporters for business follow-ups. We recently launched a business exchange portal, Fish Exchange, to connect Indian seafood exporters with their buyers. We also, periodically, organise technical sessions on various advances in the fisheries sector for the benefit of stakeholders. Other than that, MPEDA also provides various financial assistance schemes to exporters.
TDB: What are your main export destinations? Do you see the global demand for frozen cuttlefish growing?
Muhammad Ashfaq Dandia (MAD): We got into seafood business in 2006. However, it was only in 2012 we started exporting frozen squid and cuttlefish. We generally export to China, Vietnam and Europe. This is an unpredictable business because the global demand for the product keeps changing. One cannot forecast neither the demand nor the margin. For instance, when the demand for fresh cuttlefish increases, the demand for frozen cuttlefish goes down and vice versa.
TDB: Besides an unpredictable demand, what other challenges do you face?
MAD: While exporting to European countries, customisation is required when it comes to packaging of the product. For instance, some clients demand individually quick frozen (IQF) packaging – within which there are numerous ways to pack like spiral freezing, tunnel freezing, blast freezing, etc. And not to say, IQF packing increases our cost by 25% or more. Another major concern is currency fluctuation, which puts a lot of pressure on us, as it impacts both our production cost and margin. I think government assistance in this regard could help us in a big way.
TDB: What suggestions would you give to an entrepreneur who wants to enter this business?
MAD: One needs to keep in mind that fishes are perishable items. Second, the price fluctuates depending on the catch – the smaller the catch, the higher the cost of production. So, if the catch is small, it’s difficult to sell as the product is priced higher. Competition from other countries is also a factor. Sometimes, the catches in Yemen are higher, and Yemen is a popular source for buyers. Over the years, I have noticed that buyers prefer the quality cuttlefish caught in Yemen. Yemeni exporters also sell in Europe, but at a lower price. This is a big challenge for us. Hence, this business comes with its unique set of limitations.
TDB: How do you find or reach out to prospective clients?
MAD: We subscribe to various trade websites, and sometimes agents approach us. Reputation is something that takes time to develop – but if the quality, which is the secret ingredient, is good and consistent, you can build a brand.
TDB: Is it challenging for Indian seafood exporters to comply with EU health and safety requirements?
Biju AR (BAR): Well, it can be quite difficult to get the paperwork and lab testing done. For instance, testing has to be done only through an Export Inspection Council (EIC) lab. Many a times there can be delays of up to two weeks.
TDB: Do you think that there are ways to increase exports of squid and cuttlefish from India?
BAR: India can offer quality seafood products – not only cuttlefish but other aqua products too. Many countries have created a niche space in the market by advertising their speciality, which India hasn’t given importance to. Our products are natural, not genetically modified, and this must be emphasised while selling across global markets. Indonesia and Malaysia have promoted their brands really well – despite the fact that their exporters buy cuttlefish from India, pack it and sell in Europe. And still, they manage to garner higher margins than their Indian counterparts.
TDB: Which are your primary export markets and what’s the best way to reach out to prospective buyers?
BAR: We export whole cuttlefish to China and some other Asian countries. And for whole cleaned cuttlefish, our markets are Spain, Italy and other EU nations. Generally, trade fairs are the best ways to get in touch with potential clients and, luckily, many international fairs take place around the year for the seafood industry. With that said, sometimes unscrupulous agents also attend these events and they tend to spoil the market.
TDB: What would you advise someone who wants to enter this business?
BAR: It’s a very unpredictable business as the profit depends on the catch. When the catch is good, price of Indian cuttlefish comes down at par with supplies from other countries. Further, exports business demands extra efforts and expertise. For instance, cleaning, freezing and packing one kilogram of cuttlefish can cost up to Rs.40. Also, acquiring a letter of credit (LC) is a problem as it can take up to 60-90 days – and at times up to 120 days. High cost of credit too results in lower margins. In fact, at times, the exporter is just working to pay back the bank. That said, if one is committed and acquires the skills needed to export, he or she will succeed.
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