creating viable export agriculture through integrated finance: experience with agri-export zones...
TRANSCRIPT
Creating Viable Export Agriculture Creating Viable Export Agriculture Through Integrated Finance: Through Integrated Finance: Experience with Agri-Export ZonesExperience with Agri-Export Zones
Presented By: Mukul Sarkar, Exim Bank
Mumbai, March 16, 2007
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Exim India
Presentation Structure
India’s agri exports potential and constraints. Brief background of AEZ. How AEZ helps in establishing a value chain. Financing needs in AEZ and Integrated Finance. Performance of AEZs. A word on Exim Bank.
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Exim India
India’s Agri Exports: Potential
The size of the global food trade is about USD 650 bn. Value of India’s agri exports is about USD 10 bn i.e. less than 1.50%. India has one tenth of world’s arable land (size is more than China’s). It has rich and diverse agro climatic zones with more than 50 major
crops. One fifth of world’s irrigated land. 2nd largest producer of fruits and vegetables. 3rd largest producer of agri commodities (largest in food grains).
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Exim India
Agri Exports – India’s Potential
No. 1 Producer of Tea, Mango, Banana, Cashew, Cauliflower, Okra, Pulses, Milk etc.
Largest producer, consumer and exporter of spices. The country is a treasure house of medicinal aromatic plant species. Exports are mainly confined to commodities. Tremendous scope for
value addition. In horticulture products, India has certain competitive advantages. WTO regime provides great opportunity for exports. Farmers can benefit from exports of high value products.
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Exim India
Agri Exports: What Constrains Us?
Low productivity due to inappropriate cultivation practices and improper harvest methods. This affects international competitiveness.
Inadequate infrastructure. Too many middlemen in the procurement chain. Lack of contract farming practices. Quality problems due to poor post-harvest management. Inadequacy
of domestic quality standards. Not able to meet stringent SPS/Codex requirements of developed
countries. No clear focus on exports due to vast domestic market with low quality
standards.
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Exim India
AEZ: Concept
It was announced in the Budget 2001-02. Identifying geographically contiguous areas with similar agro climatic
conditions with potential for one or few agri products for exports. End-to-end development of exports across the entire value chain. Integration of various assistance programmes of both State and
Central Governments. Incentives under EXIM Policy. APEDA is the Nodal Agency. Other stakeholders are MOFPI, NABARD, NHB, State Govt. Agencies,
Agricultural Universities, R&D organisations, Banks/FIs etc. Aim is to induce private sector investments.
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Exim India
AEZs in Various States
State No. of AEZ Agri Products
Maharashtra 8 Grape, wine, mango, flowers, onions, pomegranate, banana & orange.
Punjab 3 Vegetables, potatoes, Basmati rice.
West Bengal 6 Pineapple, lychee, potatoes, mango, vegetables and tea.
Karnataka 4 Gherkins, rose onion, flowers, vanilla.
Uttar Pradesh 4 Potatoes, mangoes, vegetables, Basmati rice.
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Exim India
AEZs in India……
State No. of AEZ Agri Products
Uttaranchal 4 Lychee, flowers, Basmati rice.
AP 5 Mango pulp, vegetables, mango, gherkins, chilli
MP 4 Potatoes, wheat, lentil, orange, seed.
Other States 22 Coriander, cumin, Ginger, medicinal plant etc.
Total 60
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Exim India
Gap Between Farmers and Exporters
Farmers Exporters
Inputs
Infrastructure
Storage
Transportation
Technology
Finance
Quality Assurance
Training
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Exim India
Broken Agri Chain in India
Production
•Poor extension•Supply of inputs•Low productivity•Outdated farming practices
Supply Chain Processing Marketing
• High wastage •Lack of storage• Poor transportn.• Many intermediaries
• No assured supply of inputs• Lack of processing facility•Technology
•Poor infrastructure•Lack of grading• No market linkages
Broken chain increases credit risk and limits credit flow
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Exim India
What AEZ Offers to Improve Value Chain?
Training of farmers and strengthening of extension services. Soil testing laboratories. Supply of quality seeds/plants. Setting up pack houses with sorting/ grading facilities. Greenhouses Pre-cooling units, cold storage. Refrigerated vans Irradiation units/ vapour and heat treatment units Perishable cargo handling facilities at airports
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Exim India
What AEZ Offers to Improve Value Chain?
Waiver of electricity duties for processing units. Transport subsidies. Waiver of sales tax on packing materials. International certifying agencies. Encouraging private investments. Promoting Contract Farming.
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Exim India
Financing Needs in AEZ
Farmers need finance for purchase of quality seeds, fertilizers, pesticides, harvesting equipment etc.
Service providers like cold storage, pack house, refrigerated vans, testing facilities need finance to create infrastructure.
Processors need finance to set up processing facilities and working capital.
Exporters will need trade finance for exports.
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Exim India
Integrated Finance through Contract Farming
In Agri Exports, assured supply of the quality agri products is critical. Price stability can also be achieved through contract farming.
Farmers
Processors Exporters/ Retailers
ContractFarming
Buyback
Finance
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Exim India
Advantages of Integrated Finance?
Risk to stakeholders is minimized. Unknown risks to calculated risks. Risks are shared among stakeholders. Enhances credit flow to agri sector Makes agriculture more sustainable. Overall efficiency and productivity of the chain improves. Reduction of losses and wastage. Improves traceability and better control on quality.
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Exim India
PERFORMANCE OF AEZs
Total investments are about Rs.810 crores in 60 AEZs. Exports of USD 1.10 bn during the last 5 years. Both investments and exports are less than half of the originally
projected levels. More needs to be done in the area of infrastructure. AEZs for gherkins, basmati rice, mango, mango pulp, grape,
walnuts, onions in different states have done well in terms of exports.
Products with no ready local market have a better chance of success.
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Exim India
SET UP BY AN ACT OF PARLIAMENT IN SEPTEMBER 1981
WHOLLY OWNED BY GOVERNMENT OF INDIA
COMMENCED OPERATIONS IN MARCH 1982
APEX FINANCIAL INSTITUTION TO PROVIDE MEDIUM AND
LONG TERM EXPORT FINANCE
Exim Bank of IndiaExim Bank of India
THE GENESIS
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Exim India
Established “for providing financial assistance to
exporters and importers, and for functioning as the principal financial institution for coordinating the working of institutions engaged in financing export and import of goods and services with a view to promoting
the country’s international trade…” (Export-Import Bank of India Act, 1981)
ObjectivesObjectives
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Exim India
Range of Products & ServicesRange of Products & Services
Pre-Shipment
Export Marketing
Export Production
Export Product
Development
Import Finance
Advisory Services
Investment Abroad
Post-Shipment
Presence Across All Stages of Business Cycle
INFORMATION
Advisory Services
Knowledge Building
SUPPLEMENTS FINANCING PROGRAMMES
Value Based Services
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Exim India
Head Office
Domestic Offices
9 Mumbai, Delhi, Kolkata, Chennai, Bangalore, Hyderabad, Ahmedabad, Pune, Guwahati
Overseas Rep. Offices
5 Washington D.C., Singapore, Budapest, London, Johannesburg
Mumbai
Customer-centric organisation
Inter-Office connectivity
OrganisationOrganisation
OFFICES
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Exim India
Exim Bank’s Loan Products Exim Bank finances only exporter or importer. Term Loan for setting up new project, expansion, modernisation, import
of machinery, technology. Term loan for setting up JV/WOS abroad. Financing overseas acquisition. Pre-shipment/Post-shipment finance. Working Capital Term Loan. Buyer’s Credit. Supplier’s Credit. Equity investments in overseas ventures. Factoring through Global Trade Finance
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Exim India
Exim Bank Lines of Credit (LOCs)Exim Bank Lines of Credit (LOCs)
Enables import of Indian equipment and technology on deferred credit terms
Direct exposure on overseas borrowers
No recourse to Indian exporters
Exporters get payment on shipment
Particularly relevant for small and medium sectors
Extended to Overseas Governments, Government agencies overseas,
National or regional development banks abroad, Commercial banks abroad
GOI Lines of Credit also extended through Exim Bank
More than 60 Operative LOCs amounting to approx. US$ 2 billion in over 60
countries in Asia, Africa, CIS and Latin America
A Catalyst for Trade Promotion
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Exim India
Advance Payment: 10% of FOB/ CIF value
Credit offered: 90% of FOB/ CIF value
Credit Period: 5 years for capital and
engineering goods
2 years for other goods
Availability period: 18 months for opening L/c
24 months for disbursement
Basic Terms of Exim Bank’s LOCs
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Exim India
Developing countries who lack forex can buy Indian goods on credit.
Entry mechanism for new markets/development of new market.
Exporters receive cash payment for exports under LOC.
An arrangement for financing a number of export contracts under one umbrella.
Benefits of LOCs
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Exim India
Research ActivitiesResearch Activities
Occasional & Working Papers on Agri and Agro based sectors
Floriculture
Herbal medicinal plants
Agro & Processed foods
Fresh Fruits and Vegetables and Dairy
Organic Products
Biotechnology
Vanilla
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Exim India
Exim Bank : Exim Bank : Partner in GlobalisationPartner in Globalisation
Technology
Capital
(Foreign Investment)
Raw Materials
Capital Goods
Final Products
Capital Goods
Capital
(Overseas Ventures)
Product
Development
Production
Marketing
Pre shipment
Post shipmentVALUEVALUE ADDITIO
N
ADDITION
EXPORT
EXPORT
MMII
TTRR
OOPP
EXIM BANK
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