Shippers left high & dry due to policy changes on agri-exports

A group of dry bulker owners are in two minds on whether the additional focus on shipments of agricultural commodities would reap the desired dividends, especially at a time when iron ore exports are in a sorry state and coal imports at a low ebb in the wake of the depreciating value of the rupee against the dollar.

Although India is one of the largest producers of food and non-food farm products, the flip-flop in government policies has been a cause for concern for the trade since the industry thrives on certainties.

It may be recalled that the government's call for a ban on cotton exports a few months ago had evoked strong protests from farmers, which snowballed into a massive agitation. This prompted the government to revoke the ban due to fears of electoral losses.

The trade was ill at ease due to the ban owing to apprehensions that it would result in loss of business, as exports to China, the largest buyer of the Indian cotton, would become uncertain.

The cotton industry feared that a prolonged ban would force China to look for alternate supply sources, which in turn would have a ripple effect on Indian cotton by pushing prices of the commodity down.

While the ban would have frustrated all efforts to create a stable capacity in the medium term, its revocation saw China continuing its purchase of Indian cotton.

However, shippers are keeping their fingers crossed as they are still unsure about the stability of government policies.

The government also lifted the four-year ban on wheat exports in July last year, after countries like Russia, Australia and Canada began foraying into India's traditional wheat market.

On the sugar front, the government's move to allow exports in excess of three million tonnes, as agreed earlier, by eliminating quantitative curbs failed to cheer shippers.

While experts agree that the flagging rupee against the dollar has rendered Indian sugar cheap in the global market, they contend that this apparent decline in prices need not necessarily lead to a quantum jump in exports due to several factors.

Firstly, they point out that pushing sugar in the current global market may not be easy, given that there was a glut, with excess output estimated at more than 9 million tonnes as compared to the earlier projection of 8 million tonnes or so.They pointed that the easing was just a temporary phase and the same could be brought back in case domestic supplies were threatened.

Following a series of flip-flops and delays, they said the government's recent hints that curbs could be reimposed once exports touched a certain level have kept markets on edge.

The government did the same on wheat and rice exports late last year, eliminating curbs but tacitly indicating a limit if the situation so warranted.

Stating that the industry would like to see India as a reliable supplier of agri-commodities in the global market, shippers stressed that this would require stability in government policies and predictability, which they today consider is a tall expectation.

Some shippers believe that the current uncertainties with regard to exports of wheat, sugar and cotton can be partially eliminated if India, with a frail rupee, enters into bilateral trade pacts with countries in West Asia, Africa and SAARC. They feel that such pacts will guarantee assured shipments and therefore business to trading firms.

Contending that shipment of agri-commodities is not just about availability of shipping space or freight, experts point out that there are many other critical factors such as mode of transport, port facilities, connectivity, service contracts, contract negotiation, health hazards, safety issues, labour, congestion and the global scenario. To cite an example, they say that the high cost of procurement and transport to ports often renders the free-on-board price of India's agri-exports uncompetitive in the global market.

Source : Exim News Service - NEW DELHI, June 26