Professional Documents
Culture Documents
REPORT
ON
FOOD INDUSTRY IN INDIA
INDEX
• 1.1 Introduction
• 1.2 Advantages & Challenges
• 1.3 Types of products
• 1.3.1 Traditional
• 1.3.2 Recent trends
• 1.3.3 Estimated consumption of packaged & processed food products
• 1.4 Consumer choices
• 1.4.1 Food preferences
• 1.4.2 Shopping habits
• 1.5 Statistics of foreign trade (India’s import from Italy)
PART 6 OBSTACLES
• 15.1 Introduction
• 15.2 Concerns expressed over IPR protection & India’s response
• 15.3 Copyright protection in India
PART 16 RULES ON LABELLING AND PACKAGING
• 16.1 Introduction
• 16.2 Requirement specific to nutritional labeling
• 16.3 Packaging and container requirements
• 16.4 Food additives regulations
• 16.5 Pesticides and other contaminants
• 16.6 Other regulations and requirements
• 16.7 Other specific standards
• 16.8 Copyright and / or trademark laws
• 16.9 Import procedure
• 16.10 Regulatory agency contacts
PART 17 EXHIBTIONS
PART 18 LOGISTICS
EXECUTIVE SUMMARY
The idea of India is gradually changing as number of countries showing interest to invest in
India is increasing. According to an AT Kearney’s FDI Confidence index, India has displaced
the US as the second most favored destination in the world after China. India attracted FDI
at US$7.96 billion during the first half of FY06, as against US$2.38 billion during the same
period in FY05, more than 3 times growth. India’s economy is predicted to be growing over
8% in 2006 and with a billion plus population India has its wings of varied culture and
business/industry scenario across the country. At the backdrop of such characteristics
prospective investors in any foreign countries will be interested to know ‘Doing business in
India in wine industry’. The study aimed at highlighting macro-economic indicators of the
country with its risk analysis in terms of currency, non-collection of goods and non-
payment. It also discusses obstacles that the prospective investors may face and
appropriate marketing strategies that they should adopt to ensure smooth landing in the
country which requires a good understanding of its geographies and associated culture and
business environment, least but not the last the market dynamics. Approach taken for this
study was to collect information/data from various authentic sources like industry
associations, trade agencies and respective ministries wherever applicable. As far as
policy/regulations are concerned respective ministries’ reports and guidelines have been
referred and an attempt has been made to explain them appropriately as relevant they
may be. Salient points which are key findings in this report are given below.
¾ Challenges in the market is still to find the right partner, knowledgeable about local
market and procedural issues for foreign industries investment in India and can
formulate the right strategies with solid foundation for setting up manufacturing
base as JVs as the FDI policy may stipulate in respective sectors
¾ Tariffs (although tariff structure has been reduced considerably since economic
reforms but issues still remain in some specific sectors) and poor infrastructure still
pose a serious challenge to FDI.
¾ While marketing products distribution strategy can really make the difference;
however merit has to be given after due diligence is done and a meticulous plan
should be in place. Small distributors can really make a drastic improvement in
sales growth where flexible marketing strategies play an important role.
¾ A joint venture company is generally formed under the Indian Companies Act of
1956 and is jointly owned by an Indian company and a foreign company. This type
of arrangement is quite common because India encourages foreign collaborations to
facilitate capital investments, import of capital goods and transfer of technology.
¾ All industrial undertakings are exempt from obtaining an industrial license to
manufacture, except for (i) industries reserved for the Public Sector, (ii) industries
retained under compulsory licensing, (iii) items of manufacture reserved for the
small scale sector and (iv) if the proposal attracts location restriction.
¾ Being a buyer’s market from seller’s market promotion of products matters much.
The key to gaining rural market share is increased brand awareness, complemented
by a wide distribution network. Rural markets are best covered by mass media -
India’s vast geographical expanse and poor infrastructure pose serious challenge for
communication and hence emphasis must be given in communication problems to
be really effective in selling to rural market.
¾ India is still not holding its laws high for protecting copyright issues. As a result
cases of counterfeiting and violation of copyright act happens and probably judicial
system is still not being able to curb the menace. Adjudication of cases is extremely
slow.
Logistics play an important role in distributing products to all corners of the country. Due to
its vast territory challenges in implementing a smooth supply chain model is really
challenging and hence outsourcing to third parties is very common and an useful and
effective strategy to reach market place just in time.
PART 1 MARKET OVERVIEW
1.1 Introduction
India is a country of striking contrasts and enormous ethnic, linguistic, and cultural
diversity. It has a population of 1.1 billion, and it is comprised of 28 states and seven
Union Territories (under federal government rule). The states differ vastly in resources,
culture, food habits, living standards, and languages. Vast disparities in per-capita
income levels exist between and within India’s states. About 75 percent of the country’s
people live in its 550,000 villages; the rest in 200 towns and cities. There are 27 cities
with a population above one million people.
India has the largest number of poor, with 35 percent of the population surviving on less
than $1 per day, and 80 percent of the population surviving on less than $2 per day1.
Nearly 51 percent of Indians’ consumption expenditures go for food (54 percent in rural
area and 42 in urban areas)2; mostly for basic items like grains, vegetable oils, and
sugar; very little goes for value added food items. In recent years, however, there has
been an increased shift towards vegetables, eggs, fruits, meat, and beverages. Religion
has a major influence on eating habits and, along with low purchasing power, supports a
predominantly vegetarian diet.
Some observers of India’s economic scene are, however, highly optimistic about
consumption growth potential, and believe that rising income levels, increasing
urbanization, a changing age profile (more young people), increasing consumerism, a
significant rise in the number of single men and women professionals, and the availability
of cheap credit will push India onto a new growth trajectory. These segments of the
population are aware of quality differences, insist on world standards, and are willing to
pay a premium for quality. Nonetheless, a major share of Indian consumers has to
sacrifice quality for affordable prices. Potential US exporters should also bear in mind that
India’s diverse agro-industrial base already offers many items at competitive prices.
Sixty-five million people are expected to enter the 20-34 year age group from 2001 to
2010. By 2025, 40 percent of Indians are expected to be urban dwellers.
1
UNDP Human Development Report 2004
2
Consumer Household Expenditure Survey 59th Round (January – December 2003), National Sample Survey
Organization, GOI
Structural reforms and stabilization programs during the 1990s have contributed to
India’s sustained economic growth, which has been relatively strong over the past two
decades, averaging 6 percent annually. Since 1996, the Indian government has gradually
lifted import-licensing restrictions, which had effectively prohibited imports. On April 1,
2001, all remaining quantitative restrictions were removed, putting India in compliance
with its WTO commitment. Nonetheless, the government continues to discourage
imports, particularly agricultural products, with the use of high tariffs and non-tariff
barriers. Import tariffs on most consumer products, although declining, are still high,
ranging from 30.6 to 52.2 percent. Some sensitive items, such as alcoholic beverages,
poultry meat, raisins, vegetable oils, wheat, rice, etc., attract much higher duties. Non-
tariff barriers include unwarranted sanitary and phytosanitary restrictions and onerous
labeling requirements for pre-packaged foods. Other factors adversely affecting imports
include a poorly developed infrastructure (transportation and cold chain), a predominantly
unorganized retail sector, and outdated food laws. However, some positive factors are:
Advantages Challenges
Large and growing middle class Divergent food habits
Increasing exposure to American products Preference for fresh products and traditional
and lifestyle foods
A slow but steady transformation of the Difficulties in accessing vast untapped rural
retail food sector in cities markets
Growing number of fast food chains Poor infrastructure
Increasing urbanization and growing Diverse agro-industrial base offering many
number of working women products at competitive prices
A growing food processing industry looking High tariffs, dated food laws, and unscientific
for imported food ingredients sanitary and phytosanitary restrictions
Improved Indo-US political relations Competition from countries with better
geographic proximity
1.3 Types of products:
1.3.1 Traditional
There is no single traditional cuisine of India. The many cultures that have come to India
over the centuries have contributed their flavours and recipes using the basic products
available locally.
Cuisine Description
Kashmiri. Largely meat based, particularly lamb, goat and chicken
flavoured with saffron and chillies. Other products include walnuts,
dried dates and apricots used in puddings, curries and snacks.
Cottage cheese is popular with meats and vegetables. Fresh
water fish is also a delicacy. Popular desserts consist of fresh
fruits such as strawberries, plums, cherries and apples.
Punjabi Marinated chicken, fish, paneer, rotis and naans of many types
are cooked in earthen ovens half buried in the ground. In the
winter, makki ki roti (maize flour bread) is popular along with
sarson ka saag (mustard leaf gravy). Fresh curd and white
butter are consumed in large quantities. A popular drink is lassi (a
sweet or salted drink made with curd). Other popular dishes are
ma ki dal, rajma (kidney beans) and stuffedparathas.
Mughlai Rich sauces, butter-based curries, ginger flavoured roast meats
(Delhi). and delicious sweets.
Bengali. Fish in a variety of styles. Use of mustard oil rather than coconut
oil. Five basic spices used: zeera, kalaunji, saunf, fenugreek and
mustard seeds. Sweets made from burnt milk, yoghurt
sweetened with jaggery, crisp samosas.
Maharashtrian. Subtly flavoured vegetarian delicacies and hot, aromatic meat and
fish curries. Crispy sweets made mostly of rice and jaggery.
Konkani and Malwani cuisines originated in the coastal parts of this
region and are sea-food based.
Goan Influenced to some extent by Portugese culture. Tangy pork
vindaloo, spicy sorpotel and fish curry with rice. Coconut and fish
based dishes. Local wines or the local liqueur called Feni. Most,
but not all Goan dishes are chili hot, spicy and pungent. Seafood
includes prawns, lobsters, crabs, and jumbo pomfrets (bream).
Goa is not known as vegetarian. Hindus like lamb and chicken
while Christians like pork and both prefer fish and seafood to any
other meat.
Gujarati. Vegetarian cuisine. Lentils and vegetables, yoghurt and
buttermilk are a part of Gujarati's daily diet. Potatoes, brinjal,
and green beans and other vegetable are used in the winter to
prepare undhyoo. Other dishes are prepared with chickpea flour,
thickened milk, nuts and the srikhand. Yogurt, flavoured with
saffron, cardamom, nuts and candied fruit.
Rajasthani. Historically the Rajas who went on hunting expeditions ate the
meat of the game fowl they brought back. Vegetarian Rajasthanis
cook in pure ghee, famous for its aroma. Rajasthan includes a
large desert area and the scarcity of water and lack of fresh green
vegetables has affected Rajasthani cooking. Dried lentils and
beans from indigenous plants like sangri, ker etc. are staples of
the Rajasthani diet. Gram flour is an integral cooking ingredient.
Bajra and corn are used all over the state for making rotis and
other breads. Other food items are millet bread, chutney, onions
and milk
Hyderabadi This category includes the original red hot Andhra cooking and the
(Andhra Hyderabadi cuisine with its Mughlai influence. Vegetables are
Pradesh). prepared with different masalas giving the same vegetables
different flavours. Traditional Andhra cuisine includes many non-
vegetarian dishes which are also spicy. Hyderabadi cuisine is rich
and aromatic with a liberal use of spices and ghee as well as nuts
and dried fruit. Lamb is the most widely use meat in non-
vegetarian dishes. The biryanis (flavoured rice with meat or
vegetables) is one of the most distinct Hyderabadi foods.
The middle class of India has not been satisfactorily measured. It is very heterogeneous
and its size depends on the definitions of several parameters. Estimates range from 25
million to 200 million but it is generally accepted that it is growing. FVG exporters are
likely to find the greatest opportunities in the markets serving the middle and upper
income groups of India.
The typical pattern of buying groceries and emerging trends are closely associated with
both tradition and new technology. A typical household purchases less-perishable food and
other groceries at the beginning of each month - sometimes having them delivered. More-
perishable products such as bread and eggs are purchased every one or two weeks. Milk
is purchased daily. It is estimated that only 15% the potential market for refrigerators has
been exploited. As increasing numbers of Indians purchase refrigerators, the buying
patterns of groceries will change.
Grocery stores are the dominant food outlets but fruit and vegetables are bought from
unorganized vendors. Some grocery chains are expanding into the supermarket or
hypermarket category offering a wide range of products; however, purchasing of fruit and
vegetables in this context has not yet been fully accepted. Even so, supermarkets and
hypermarkets are putting pressure on the traditional grocery store. Visits to a
supermarket encourage much impulse buying compared to visits to a traditional grocery
store or phone shopping.
Eating out is a very popular activity while attending other functions. It is estimated that
Indians spend INR 350 billion eating out annually. Of this, organized establishment’s
accounts for only INR 20 billion. International fast food chains such as Subway,
McDonald's and Pizza Hut are found in shopping malls and near cinema theatres.
The "well-off” in urban areas are increasingly eating out in coffee shops, malls or retail
stores. Lounge bars are the latest trend in urban areas and are frequented by young
professionals, successful executives and single women in their late 20's. This trend began
in Mumbai, Bangalore, Delhi and Kolkata and will no doubt spread to other urban areas.
Among the "affluent", clubs are becoming popular. In addition to many recreational
facilities they are upgrading their food facilities and can compete with some of the finest
restaurants or hotels of India. The "affluent" also have an interest in the performing arts.
A play in Mumbai can cost about INR 1,000.
Middle to upper income families are increasingly two income, younger families. A small
proportion of Indian families are moving to quick ready-to-eat foods and frozen foods.
However 90% of the population still prefers fresh foods and consider processed foods to
be not fresh and containing harmful preservatives. Table below presents estimates of the
consumption of packaged and processed foods. Bread had the highest estimated
consumption level in 2003, (1,656.5 gms per person). The consumption of crisps/chips
was the fastest growing food sector from 1998 to 2003 (77.82% over the 5 year period)
although the level of consumption was still low (9.96 gms per person). Similarly, the
consumption of pasta increased 76.3 % from 1998 reaching 0.705 gms per person in
2003. Both chips/crisps and pasta are popular among consumers below 19 years of age.
Pasta is also popular with mothers as a snack for school-age children.
India is well known for its tradition of vegetarianism. Among those who are not
vegetarians, beef is still generally taboo to most Hindus (80.5 percent of the population),
Sikhs (1.9 percent of the population), and Jains (0.4 percent of the population), all of
whom consider cows sacred. Many Indians are vegetarians because they cannot afford a
non-vegetarian diet. As India has been at the crossroads of many peoples and cultures
over the centuries, some foreign elements have invariably seeped into the local culinary
culture. Thus, India’s culinary tradition is constantly changing. Nonetheless, Indians
have a strong preference for fresh products and traditional spices and ingredients, which
has generally slowed the penetration of American and other Western-type foods.
However, with urbanization, rising incomes, more working women, the arrival of some
food multinationals, and a proliferation of fast food outlets, the acceptance of packaged
and ready-to-eat food products is increasing, especially among the urban middle class.
These products, nonetheless, are usually tailored to Indian tastes. Many Indians are quite
willing to try new foods, but usually return to traditional fare. While Western foods have a
reasonably good chance of succeeding in casual dining, integrating them into the main
meal will be more difficult.
Demand for specialty and high-value food items, including those imported, such as
chocolates, dry fruits (almonds, cashews, pistachios, etc.), cakes, pastries, exotic fruits,
and fruit juices, typically peaks during the fall festive season, especially at Diwali – the
Festival of Lights. Hence, from October to December is the best time to introduce new
food products into the Indian market.
Typical imported food items that can be spotted in retail stores in cities include chocolates
and chocolate syrups, biscuits, cake mixes, fruit juices, canned soups, pastas, popcorn,
potato chips, canned fish and vegetables, ketchup, and fruits such as apples, grapes, and
kiwis.
Lacking home refrigeration and purchasing power, most Indians shop daily at
neighborhood kirana shops (small retail outlets) or roadside vendors. Most consumers
regard shopping as a chore, and few are familiar with alternatives to traditional store
formats. Convenience to one’s home is important, since daily shopping and sensitivity to
food freshness is an integral part of shopping habits. Indians buy fruits and vegetables in
one shop, dairy products in another, groceries in a third, and meat and fish in yet another.
Quality is important, but there is a reluctance to pay a premium. Trust in the retailer,
especially with regard to quality of food and replacement of defective goods, is important.
Although added services such as home delivery are welcome, consumers are unwilling to
(and do not have to) pay a premium for this service. Women do most of the shopping
and make most of the food purchasing decisions. Households able to afford Western
imports usually have servants who buy, clean, and prepare foods. Availability of many
fresh foods, particularly fruits and vegetables, is seasonal, and people are accustomed to
adjusting their diet to the season. Processed/packaged foods in great demand include
ketchup and sauces, jams and jellies, table butter and ghee (melted butter), cooking oils,
various masalas (spice mixes), pickles, wheat flour, noodles, snack foods (mostly Indian
types), and health drinks. Most packaged food items are sold in small containers, due to
customers’ limited purchasing power. Only in the past few years have Indians, mostly in
cities, been exposed to supermarkets in the Western sense. Semi-urban, non-
metropolitan, and rural areas have yet to feel the impact of large-scale retailing. Most
people, even in cities, still associate supermarkets with “expensive” rather than “cost
effective.” However, in recent years, the Shopping Mall culture has caught on in India,
with many large malls built in large cities and suburbs.
1.5 Statistics of foreign trade (India’s Import from Italy)
2004- 2005-
S.No Commodity (Value in Rs. Lakhs) %Growth
2005 2006
1 Meat And Edible Meat Offal. 24.57 67.58 175.1
2 Fish And Crustaceans, Molluscs And Other 10.83 45.72 322.06
Aquatic Invertabrates.
3 Dairy Produce; Birds' Eggs; Natural Honey; 179.21 196.34 9.56
Edible Prod. Of Animal Origin, Not Elsewhere
Spec. Or Included.
4 Products Of Animal Origin, Not Elsewhere 217.56 167.62 -22.95
Specified Or Included.
5 Live Trees And Other Plants; Bulbs; Roots And 0.04 17.68 42,279.08
The Like; Cut Flowers And Ornamental
Foliage.
6 Edible Vegetables And Certain Roots And 25.11 44.67 77.89
Tubers.
7 Edible Fruit And Nuts; Peel Or Citrus Fruit Or 281.54 413.01 46.7
Melons.
8 Coffee, Tea, Mate And Spices. 181.9 404.86 122.57
9 Products Of The Milling Industry; Malt; 257.21 200.14 -22.19
Starches; Inulin; Wheat Gluten.
10 Oil Seeds And Olea. Fruits; Misc. Grains, 128.94 329.48 155.53
Seeds And Fruit; Industrial Or Medicinal
Plants; Straw And Fodder.
11 Lac; Gums, Resins And Other Vegetable Saps 340.65 379.48 11.4
And Extracts.
12 Animal Or Vegetable Fats And Oils And Their 650.52 1,034.58 59.04
Cleavage Products; Pre. Edible Fats; Animal
Or Vegetable Waxex.
13 Preparations Of Meat, Of Fish Or Of 3.28 59.26 1,709.07
Crustaceans, Molluscs Or Other Aquatic
Invertebrates
Indian food processors may be divided into the following main categories:
• Large Indian companies that have their production base in India or neighboring
countries (for tax-saving purposes)
• Multinational and joint-venture companies that have their production base in India
The following table shows some of the major food-processing companies in India and their
products. This list is neither exhaustive nor ranked according to the order of importance.
The end use channels for most of them are retail and hotel, restaurant and institutional
(HRI) markets. Sales figures for these companies are not available.
INDIAN COMPANIES
2.2.1 Production:
• The food-processing industry in India has undergone big changes over the last six
to seven years, in terms of types, variety, quality, and presentation of products,
which is mainly a result of the liberalization that led to foreign direct investment
(FDI) in the processed food sectors.
• Most food-processing sectors have been brought under the liberal, transparent,
and investor-friendly FDI policy, which allows 100 percent FDI.
• Nevertheless, the proportion of FDI in the food-processing sector to total FDI into
India is low, constituting about 4 percent of total FDI inflow from 1991 to 2004.
• Indian food and beverage companies are expanding their operations to neighboring
countries like Bangladesh, Nepal, Sri Lanka, Commonwealth of Independent States
countries, and the Middle East.
• Takeovers and mergers are beginning to occur in the Indian food-processing sector,
leading to consolidation.
• The food-processing industry is beginning to focus on, and invest in, advertising
and awareness campaigns about products and brands.
• Companies have added extras to their existing brands, including stylish packaging.
• The growth in the food-processing sector has generated increased interest in high
quality food ingredients in order to produce high quality foods.
• The ready-to-eat food sector is growing at a high rate due to the changing
lifestyles of the middle-class consumers (both partners working, etc.).
2.2.2 Consumption:
The following factors influence the type and quality of inputs in processed foods:
• A large and an exceedingly wealthier middle class is creating growing demand for a
wider variety of high quality processed foods.
• The changing age profile (sixty-five million people expected to enter 20-34 year
age group by 2010) and increasing exposure to western-type products and
lifestyles.
• The recent trend toward a healthier lifestyle has generated a niche market for diet,
healthy, low-calorie, and non-fat food products.
2.3 Competition
India’s domestic industry is the primary competitor for FVG food-processing and
ingredients suppliers in India. India, with diverse agro-climatic conditions, has a
production advantage in many agricultural goods, with the potential to cultivate a large
range of agricultural raw materials required by the food-processing industry. India is a
major producer of spices, spice oils, essential oils, condiments, and fruit pulps.
Significant variations in food habits and culinary traditions across the country translate
into a competitive advantage for small and medium local players, who are familiar with
local food habits and markets. Some Indian food-processing companies have increased
market share by decreasing product prices. High import duties on processed food and
food ingredients make imports relatively costly. Existing domestic food laws restrict the
use of several ingredients, flavors, colors, and additives, thus posing an additional
challenge to FVG exporters interested in the Indian market.
Foreign competition to the FVG is mostly from countries in closer geographic proximity to
India, such as Australia and New Zealand. European suppliers are major competitors in
the food ingredient sector. Several foreign firms, including some from the United States,
have started operations in India.
2.4 Major food food ingredient suppliers
Expected
Imports Avg.
Annual Import Market
Product 2003/04 Key
Import Tariff Attractiveness
Category $ Million Constraints
Rate for FVG
1/
Growth
Cocoa & 13.0 10% 52.2% Competition Import
products from other liberalization and
suppliers and consumer
domestic preference for
suppliers imported
products
Almonds 68.0 5% Rs.35/kg Competition High seasonal
from Iran demand;
Pistachios 29.0 5% 30.6% and increasing use;
Afghanistan health
Prunes 0.1 10% 25.5% consciousness
• Marketing
• Education
• Visibility
• Events & Promotions. Work with Key organizations.
• Exposure to your facilities
• Right Partner: Work with National players.
• Youth appeal is important in a country where more than 50 million population is below
the age of 25.
Mistakes occur at different stages while doing export business with the Indian importers.
We found that unsuccessful companies committed mistakes in the four key steps and were
negatively influenced by three important factors, as given below:
Entering the Indian market requires a substantial amount of preparation and patience, and
takes a considerable period of time to accomplish. Time and other resources need to be
invested in developing knowledge of the institutional environment. Generating credibility in
the market before entry is also beneficial.
Tenders and competitive contracts require considerable background work, not only with
regard to the content of the tender request, but also on building relationships with key
decision-makers and people to understand the tender process.
Finding a partner who has knowledge of the local market and procedural issues is a must
for successful business development. For Italian business men, ideally, the Indian partner
should be conversant with the language and customs of Italy.
Appropriate and sufficient infrastructure must be in place in India to support the business.
In many cases, it is necessary to wait until the infrastructure has been developed, or else
invest in developing local infrastructure to a level sufficient enough to accommodate the
products or services being offered.
Success in India may take longer to achieve than in other international markets. It requires
a lot of preparation and investment before gains are realised, and there is relatively a high
level of risk.
3.1.2 Entering the Market
Decision-making in India is slow, particularly with the public and government sectors, and
it is important to assess the amount of time that obtaining an initial order is likely to take.
Decision-making blockages are sometimes overcome by drawing on the influence of
network links of Italian companies in India.
Some times companies have failed to understand the implications of licensing and tariffs
only to make a retreat. However, some of these companies made a re-entry when
restrictions on import licenses were partly or fully waived.
The importance of having other critical factors, such as initial relationships with customers,
solutions to bureaucratic barriers, and a period of time becoming familiar with the Indian
market, cannot be undermined.
Pricing is the key to gaining orders, and there is little doubt that Indian customers will
negotiate prices aggressively.
Although the opportunities for future growth in India are well recognised by global
companies, not all of them anticipate this market becoming a substantial part of their
business, at least in the near future. At this stage, it is still considered relatively high risk
and uncertain, with considerable change needed in the country to encourage further
investment.
3.1.5 Attributes
Establishing credibility and reputation may involve a substantial initial investment of time
and money, often before any payback is realised.
Credibility and a strong reputation are achieved by the companies in a number of ways:
building links with large Indian corporation or government customer (for example, one
company has endorsement from one of the largest banks in India); using the links of a
credible or reputable agent (or distributor/partner) or opinion-leader; leveraging from an
international reputation (e.g. with world funding agencies); becoming part of a wide
professional network that provides legitimacy in the market; drawing on links with
international partners that conduct business in India; and leveraging from customers’
experiences with the product or service in Italy– such as professionals returning to India.
3.1.6 Representation
Getting the right agent for a company is critical to success. A key attribute of successful
agents or distributors is their connectedness with political representatives and officials, as
well as with potential customers and decision-makers. Agents’ are also instrumental in
sourcing skilled labour.
Power and size symmetry between company and agent can help engender trust.
Strengthening links with agents is best done gradually.
3.1.7 Connections
Being linked to a local network is critical for success in the Indian market. An Italian
company’s access networks through their agents, distributors or partners, and, over time,
build relationships and become part of the local network involved in their business. The
networks include a range of stakeholders, but of primary importance are the decision
makers (often policy officials) and customers.
Frequent visits to India are critical, in order to build relationships, and stay informed about
the business and customers in India. The frequency of visits for the New Zealand company
managers varies, ranging from 2 to 8 times per year, depending on the particular needs at
the time. At critical times during a tender process, for example, an Italian manager may
need to make numerous visits over a short period of time.
Working with large companies provides substantial opportunities for Italian companies.
These arise from a range of factors: the reputation of the large company, the opportunity
to tap into their business networks, including customers, and access to markets, and
technical and political knowledge. In many cases, large corporations have influence at
government level, and are able to lobby for industry-based regulatory changes, access
tender information, or negotiate with key decision-makers.
Survey was conducted among a few members of Indo Italian Chamber of Commerce taking
a few industries and units and they are summarised below.
The government of India has banned any directly print or display (television etc)
advertisement or promotion of alcohol. Hence, the companies should focus on promoting
the brand without actually showing the alcohol. There are various advertisement agencies
in India which could guide the companies with the same.
According to the Advertising and Marketing (A&M) magazine, a leading trade journal,
advertising is a US$3 billion industry in India today. The Indian industry grew 11.5% in
2004-05. Media accessibility has increased exponentially, competition is unlimited,
budgets are large and expectations of advertising are high. Practically every aspect of
media is available for advertising, from print to outdoor advertising to satellite channels to
movie theatres.
Italian companies have a choice of many advertising and trade promotion channels in
India. The print media, almost completely controlled by the private sector, is well
developed and advertising and promotional opportunities are available in a large number
of newspapers including daily, weekly or monthly business publications, news magazines
and industry-specific magazines.
•The Times of India and the Hindustan Times are the largest selling English-language
newspapers, with a readership base across India.
•Leading business newspapers include the Business Standard and the Economic Times.
•Leading magazines include India Today, Business India, Business Today, Business World
and the Outlook.
Advertising opportunities are also available on satellite and cable television channels.
Doordarshan, the government-owned television network, can reach almost 90% of the
population. In addition, more than 80 satellite and cable television channels, including
many U.S. and international channels such as STAR TV, CNN, NBC, Discovery, National
Geographic and BBC, are available for advertising.
Satellite TV has grown explosively from 134m viewers in an average week in 2002 to as
many as 190m viewers in 2005. Another advertising media is the radio, by which the
government-owned All India Radio (AIR) reaches over 90% of the population. Private
radio channels are restricted to the FM music channels and are currently available only in
a few cities. Radio improved its performance in urban India (23% listen to the medium,
up from 20% three years ago) mainly due to FM. Another widely accessed medium is the
Internet. Today, net access is estimated by over 20m people. Internet advertising is
expected to grow exponentially over the next several years. All the above media are
available in English, Hindi, and a variety of regional languages.
Italian companies interested in advertising in any of the above media can work through
the many advertising agencies in India. Many large and reputable U.S. and other
international advertising agencies are present in India in collaboration with local
advertising agencies. The advertising sector in India is technologically advanced.
In addition to advertising, established public relation firms are also available to Italian
companies that require such services. In public relations too, a few Italian and other
international companies are present in collaboration with local partners.
•Through trade shows exporters can create awareness among the end-user clients.
•Costs Involved : Average costs borne by foreign exhibitor
Advertising and trade promotion are highly developed in India, and most major
International advertising firms choose local partners, as they know India and Indians well.
In addition to government-controlled television in various regional languages, there are
several popular national, international, and regional privately-owned channels. Most
urban households have televisions, and they are increasingly present in rural areas.
India also has a diverse and growing number of newspapers and glossy magazines
appealing to various social, cultural, and gender groups. According to the National
Readership Survey 20053, the reach of the press medium (dailies and magazines
combined) has increased to 300 million people from 179 million three years ago. Satellite
television has grown explosively to reach 190 million people, whereas radio’s reach has
stagnated at 23 percent of the population. The internet now reaches more than 10 million
people, with 34 percent of users surfing from home and 32 percent from cyber cafés.
Among the fast growing tribe of mobile phone owners, 14 percent access value-added
features like downloads, news, SMS, etc.
Delhi’s Annual Food Exposition AAHAR, and smaller food shows in Delhi and other cities
(IFE India, Agro Tech, Am Fest) provide opportunities for US exporters to showcase their
food products to potential clients.
Although Hindi is India’s leading national language, almost all Indian officials and business
people have an excellent command of English. Most Indian businessmen have traveled
abroad and are familiar with Western culture. Indians appreciate punctuality, but don’t
always practice it themselves. Keep your schedule flexible enough for last minute
rescheduling of meetings. Business is not conducted during the numerous religious
holidays that are observed throughout the many regions and states of India. Verify this
information with your Consulate or Embassy before scheduling a visit. Indian executives
prefer late morning or afternoon appointments between 11:00 a.m. and 4:00 p.m.
3
National Readership Studies Council – www.auditbureau.org
Indians are famous for having longer-than-scheduled meetings, so be sure to leave plenty
of time between appointments. The climate in India can be very hot, so it is advisable to
wear lightweight clothing to avoid discomfort. Men should wear a jacket and tie (and
women should wear corresponding attire) when making official calls or attending formal
occasions. Always present a business card when introducing yourself. Refer to business
contacts by their surname, rather than by their given name. Use courtesy titles such as
“Mr.”, “Mrs.”, or “Miss.” Talking about your family and friends is an important part of
establishing a relationship with those involved in the business process. Hospitality is a
key part of doing business in India; most business discussions will not even begin until
“chai” (tea), coffee, or a soft drink is served and there has been some preliminary “small
talk.” To refuse any beverage outright will likely be perceived as an insult. While an
exchange of gifts is not necessary, most businessmen appreciate token momentos,
particularly if they reflect the subject under discussion. Business lunches are preferred to
dinners. Try to avoid business breakfasts, especially in Mumbai. The best time of year to
visit India is between October and March, so that the seasons of extreme heat and rains
can be avoided. Although Delhi (the capital) has a cool, pleasant winter (November -
February), summers (April –June) are fierce with temperatures of up to 120 degrees
Fahrenheit. Mumbai (the business hub) and most other major cities have a subtropical
climate – hot and humid year around. Most Indian cities have good hotels and are well
connected by domestic airlines.
http://stylusinc.com/business/india/cultural_tips.htm
www.executiveplanet.com/business-etiquette/India.html
PART 5 PENETRATION IN THE MARKET
It is essential to survey existing and potential markets in India for products before
initiating export sales. The Indo-Italian Chamber of Commerce India, Mumbai and market
research firms in India can assist new exporters. If the FVG companies do have products
of promising sales potential in India, they can either set up a base in India or appoint
distributors or agents. The Indian government encourages foreign investment in the
food-processing sector. Hundred percent equity participation or joint ventures with Indian
companies are possible. Tax benefits and incentives are available to companies setting up
operations in Special Economic Zones (SEZ).
For FVG food ingredient suppliers, direct interaction, such as visits, with large Indian food
companies would help create awareness about new products and their uses in the Indian
context. However, as the majority of Indian food-processing units are small-and-medium
sized, it would be difficult for FVG companies to reach their intended audience directly. In
such cases, appointing agents and distributors is the best alternative. Consider the
following before selecting an agent or distributor:
o Determine through surveys who their potential customers are, and where in
India these customers are located.
o Recognize that agents with fewer principals and smaller set-ups often are
more adaptable and committed than those with large infrastructure and big
reputations.
o FVG firms should examine all distributor prospects, and thoroughly research
the more promising ones. Check the potential agent’s reputation through
local industry/trade associations, potential clients, bankers, and other
foreign companies/missions.
Aspiring FVG suppliers should also be aware of India’s varied and dated food sector laws,
particularly those pertaining to the use of additives and colors, labeling requirements,
packaging, weights and measures, shelf-life, and sanitary and phytosanitary regulations.
Refer to the GOI’s Department of Health website relating to the Prevention of Food
Adulteration Act and Rules at www.mohfw.nic.in/pfa.htm. The GOI is planning to enact a
new Food Safety and Standards Act, which is intended to be comprehensive, and which
aims to meet the dynamic requirements of international trade and the Indian food
industry. This is a move in the right direction if formulated according to international
standards and practices, and should help attract investment in the food-processing sector.
5.2 Market structure
FVG food ingredient suppliers can access the Indian market in three ways: (a) supply
directly to local food processors; (b) supply through local agents/distributors to local food
processors; or (c) start production/distribution centers in India. Some of the leading food
ingredient producers like IFF, Danisco, and Doehler have a production base in India. As
small players, scattered all over the country, dominate the Indian food-processing
industry, appointing agents/distributors would be the best way for FVG exporters to reach
them. However, some of the large Indian and multinational companies can be supplied
directly. The chart below gives an overview of the usual distribution channel for imported
food ingredients (and processed foods) applicable to FVG food suppliers.
Distributor
Wholesaler
India’s food-processing industry can be broadly classified into the following categories:
5.3.1 Companies
The principal forms of business organization in India are: Corporations, Partnerships and
Sole Proprietorships. Corporations incorporated in India and foreign corporations having a
presence in India are regulated by the provisions of the Companies Act 1956, which draws
heavily from the Companies Act of the UK. The Registrar of Companies and the Company
Law Board (CLB), both working under the Ministry of Company Affairs, have been
entrusted with the responsibility of ensuring compliance with the provisions of the
Companies Act, 1956.
These corporations have restrictions on the right to transfer shares, and can make no offer
to the public to subscribe to its shares and debentures, and cannot invite acceptance of
deposits from persons other than members, directors or relatives. The maximum number
of shareholders is limited to 50. It is required to have a minimum paid-up capital of Rs. 0.1
million ( U.S. $ 2,170).
Foreign Corporations that are incorporated outside India but have a presence in India in
the form of liaison offices, project offices, branch offices etc, are also governed by the
Companies Act 1956, which contains special provisions for regulating such entities.
Foreign corporations can set up their subsidiary companies in the form of private
companies in India. It is treated as a domestic company for tax purposes. In comparison
with branch and liaision offices, a subsidiary company provides maximum flexibility for
conducting business in India. However, the exit procedure norms for such companies are
more cumbersome. Funding could be via equity, debt and internal accruals and no approval
is required for repatriation of dividends. Indian transfer pricing regulations apply.
Foreign corporations need RBI approval to start a branch in India. A foreign corporation
cannot undertake any activity in India not specifically permitted by the RBI and is required
to register itself with the Registrar of Companies. A branch office is permitted to
export/import goods, render professional or consultancy services, carry out research work
in which the parent company is engaged, promote technical or financial collaboration,
represent the parent company for buying/selling, render services in IT and software
development, render technical support to the products supplied by the parent group,
undertake activities of foreign airline/shipping companies and manufacture by a branch
located in a Special Economic Zone.
A branch office provides ease of operation and uncomplicated closure but its operations are
strictly regulated by foreign exchange control guidelines.
Foreign Corporation are permitted by RBI to open Liaison Offices in India, subject to
approval for undertaking liaison activities and acting as a communication channel between
the foreign corporations and Indian customers. The Liaison office is permitted to represent
the Indian company, promote import/export to India, promote technical and financial
collaborations and act as a communication channel with the parent company.
A foreign corporation which has secured a contract from and Indian company to execute a
project in India may establish a project office in India without obtaining prior permission
from the RBI. However, the exchange control norms prescribe certain requirements.
Like a branch office, a project office is also treated as an extension of the foreign
corporation in India and taxed at the rate applicable to foreign corporations.
5.5.5 Joint Ventures: Foreign Companies can set up their operations in India by forging
strategic alliances with Indian partners.
Joint Venture may entail the following advantages for a foreign investor:
Established contacts of the Indian partners which help smoothen the process of setting up
of operations.
Some companies that sell high value items often find it useful to appoint an Indian party
who would be responsible for service and maintenance of their products sold into India. An
example is when IBM decided to move out of India in 1977 rather than dilute their holdings
in the Indian company (as was required by the then Indian Government), they tied up with
Indian companies to maintain the IBM equipment already installed in the country.
Similarly, Omega watches set up operations for servicing of their products in Delhi through
a third party.
In all these cases, the technical personnel of the company are trained by the parent
company to service and maintain their products. One problem that existed in the past in
such arrangement was the import of spares. However, it has now become relatively easier.
5.5.8 Franchising
Franchising has been operating in India for several decades. One well-known example of
this is the Bata shoe Chain, started in the 1960s. New franchise business concepts include
as diverse sectors as healthcare, pharmaceuticals, specialised food services, garments and
apparel, education, entertainment, fitness and personal grooming clinics and courier
services, to name a few.
India does not have any specific law on franchising. Franchising is covered within the broad
definition of transfer of technology contained in domestic legislations. A legal framework
for new franchisers interested in setting up master franchises in India however exists, in
terms of brand protection and rules regarding payment of franchise fees.
Some of the features of the Indian franchising industry are as follows:
While franchising has mushroomed in India, the concept has initially functioned mainly on
an agent basis. It is still evolving and being refined and will take a couple of years for
franchising to become more organised in India. Franchising in India is often perceived as a
tool to cover the high cost of real estate that a company interested in retailing would have
to bear. As a result, if business projections are not met, franchisees can and sometimes do
shift to other franchises. With minor variations, in a typical franchise operation, a company
approaches an owner of prime commercial space to provide the real estate, to invest in
interiors and inventories to run a franchise business, and to hire staff for the operation.
Franchisees prefer to recruit staff directly, but most franchisers insist on training the staff
themselves, particularly in educational and computer training academies. Usually, the two
parties work out an arrangement by which the franchisee agrees to sell the company’s
products on an exclusive basis. Typically, the company’s investment is reduced by about
15% if the same operation is run by a franchisee. Also, the company has no worries about
hiring and dealing with staff or worker unions.
The franchise agreement is a comprehensive document that specifies everything from the
franchise location to the finer details of operating the franchise. There are no standard
franchise agreements because every franchiser and every business is different. Many
details in the agreement are settled by bargaining, but the normal clauses that should be
on the checklist of every franchiser includes use of brand name, protection of intellectual
property, conflict of interest, indemnity, business promotion, definition of territory, period
of validity, and termination. By the same token, the franchisee will seek to ensure that the
agreement maintains his/her intellectual property rights; covers training, consultation and
equipment and includes a suitable indemnity clause.
Franchise fee payments in hard currency are allowed. A potential franchisee must submit a
proposal for a franchise operation to the government ministry that regulates the particular
industry sector. Among other details, the proposal must contain the amount of franchise
fee that will be paid to the franchiser. The proposal moves from the relevant ministry to the
Ministry of Industry and the Foreign Investment Promotion Board. Reserve Bank of India’s
approval of the franchise fee is automatic when the Ministry of
Industry clears the proposal. There are value or percentage limits on approvals of franchise
fees, with franchise involving advanced or high-technology, receiving the highest limits.
Royalty payments ranging from 3-8% are allowed in hard currency, in addition to the
franchise fee, although the norm is closer to 5%. The royalty is calculated on total turnover
for the year for the franchise operation.
Direct selling is one of the fastest growing industries in India and is an unusually good
income generator for entrepreneurs from all walks of life. In addition, direct selling offers
consumers a convenient and more informed way to buy, along with money-back
guarantees and refund policies. According to the Indian Direct Selling Association, the
direct selling industry reported a total turnover of $545m (Rs24bn) during fiscal year
2004-05.
At present, the direct selling industry employs more than 1.3m people, an increase of
100,000 from 2003-04 to 2004-05. There are about 750,000 active direct sales
executives (including men, women and couples working as a team) who buy or sell
products at least once every two months. The total number of product offerings increased
to 380 with 2,100 variants and product categories ranging from cosmetics to kitchenware,
education, home care and natural products.
According to industry estimates, there are roughly 20 direct selling companies in India
with nation-wide coverage and approximately 100 smaller companies with localised city-
specific presence. Many Indian and multinational companies like Amway, Aero Pharma,
Avon, Herbalife, Sunrider, Tupperware, Lotus Learning, Oriflame, AMC Cookware, and
Time Life Asia have started operations in India through joint ventures or wholly-owned
subsidiaries. Amway, with more than 200,000 distributors spread across 26 cities
servicing more than 306 locations, is perhaps the largest direct selling company in India
today. Tupperware entered India in 1996 and currently has more than 40,000 dealers in
40 Indian cities. Established retail companies in India have also started direct selling
operations, the most prominent being Hindustan Lever Limited of the Unilever group.
Since their launch, many direct selling companies have had to rework their strategies with
emphasis on the three critical Ps of marketing - product, pricing, and packaging. Once
considered as the medium for sales of premium products, direct selling in India today is
moving towards lower priced products to meet the demands of the price sensitive Indian
consumer. Package sizes are being reduced to bring down the psychological price barrier
and make the products sold through the direct selling channel more affordable. Some
multinational direct selling companies have also customised products to meet the needs of
Indian consumers. Major foreign direct selling companies have also established
manufacturing facilities in India.
Direct selling companies follow different plans of compensation for their sales force. Some
follow the single level plan under which sales people earn commission on sales made by
them alone, and do not earn anything on sales made by people they have introduced in
the business. They may earn a one-time reward for people they help recruit. There are
still some others who also compensate a sales person for the sales made by persons
recruited by the first sales person, and from the sales of the group or network recruited by
the first sales person’s personal recruits.
Liaison Office;
Branch Office; or
Company (either a joint-venture or a subsidiary)
Different regulations apply to each of the above three forms. The following summary
table highlights key differences between them.
PERMISSIBLE ACTIVITIES
Manufacturing NO NO YES
REGULATORY
PERMISSIONS/REGISTRATI
ONS
Bank of India;
Foreign
Investment Promotion
5.7 Processed fruits and vegetables: Less than 2 percent of all fruits and vegetables
produced in India are processed. The main products, the industry size, and major players
are shown in the following table:
5.8 Dairy Products: About 37 percent of India’s milk production of 86 million tons is
processed, 15 percent in the organized sector and 22 percent in the unorganized sector.
A major share of the milk processed in the organized sector (mostly by dairy
cooperatives) is in the form of packaged liquid milk. Other processed items include ethnic
sweets, milk powder, ghee (melted, clarified butter), butter, cheese, and ice cream. In
the unorganized sector, a major share is processed into milk-based sweets, and a smaller
share for making yogurt, butter, and ghee. The main products, the industry size, and
major players are shown in the following table:
5.10 Meat and poultry: Indian consumers prefer mostly fresh meat from the wet
markets. Only a very small share of production is further processed into value added
products, mostly for export. Major players include VH Group, Godrej, Sugunas, and
Arambagh in the poultry processing sector, and Allana's, Hind Agro, Al Kabeer in the
buffalo meat (“beefalo”) processing sector. Cow slaughter is prohibited in most states due
to religious sentiments.
5.11 Fisheries: As in the case of meat, most fish consumed comes from the wet
markets. Processing is mostly for export, and includes conventional block-frozen and
individual quick frozen products, minced fish items like sausage, cutlets, pastes,
texturized foodstuffs, and dried fish. The frozen products usually undergo primary
processing such as cleaning, deveining, descaling, peeling, etc.
5.12 Non-alcoholic beverages: India is the world’s largest tea-producing country with
an annual production of around 860,000 tons and is also one of the world’s largest tea
exporters. Tea processing includes withering, rolling, fermenting, drying, blending,
packing, and branding. Instant tea production is limited. Major players are Tata Tea, HLL,
Manjushree Plantations, Jay Shree, Goodricke, Harrison Malayalam, Eveready, and
Warren.
With an annual production of around 300,000 tons, India is a small but competitive
producer of coffee. Traditionally a tea-drinking country, average annual coffee
consumption in India is only ten cups per person. The instant coffee segment is entirely
branded and packaged, and caters mostly to the export market. Major players are Tata
Coffee, HLL, Nestle, Barista, Qwiky’s, Narasu, Leo, and ABCTC.
Pepsi and Coca Cola dominate the Indian soft drink industry.
5.13 Alcoholic Beverages: Whisky, mostly low-priced, accounts for about 55 percent of
the Indian spirit consumption, followed by rum, brandy, and vodka. Key players are UB,
Shaw Wallace, Jagatjit Industries, Mohan Meakins, and International Distilleries. With the
recent take-over of Shaw Wallace’s liquor business by the UB Group, the latter has
emerged as the world’s second largest liquor producer. Major multinationals operating in
India include Diageo, Seagram, and Baccardi Martini. UB, SABMiller, and Mohan Meakins
are the major beer-producing companies. The wine market in India is nascent, having
emerged as a distinct segment about a decade ago. Chateau Indage is the largest
domestic player in wines, followed by Grover Wines and Sula Wines. Key international
players who have a presence in India through distribution alliances include E&J Gallo,
Hardy’s, Canandaigua, and Fetzer.
5.14 Confectionary: The size of the Indian confectionary market is estimated at rs.
26.0 billion ($600 million). Sugar confectionary accounts for 61 percent of this market,
with the balance being chocolates, mints, and gums. The confectionary market has been
growing at over 6 percent annually over the last five years. The gum-based confectionary
segment has grown even faster at over 10 percent. The confectionary market is highly
fragmented with several local players such as Parle’s, Nutrine, and Ravalgaon. Key
foreign companies are Nestle, Cadbury’s, Perfetti, Lotte, Wrigley, Candico, and Joyco.
5.15 Milling and baking: 75 percent of India’s wheat production is milled into wheat
flour (atta) to make rotis or chapattis (unleavened flat bread), mostly in small chakkis
(small wheat grinding mills) in the unorganized sector. Branded atta is a relatively new
segment, developed to provide consumers a more hygienic quality, as compared to chakki
atta. Annual production of branded atta is about 1 million tons, and is growing at 7 to 9
percent annually. Major players are ITC, Pillsbury, HLL, Agro Tech Foods, and Shakti Bhog
Foods.
Bakery products constitute the largest segment of grain-based processed foods. Small
and medium unorganized local players, and a limited number of organized units dominate
the industry. Major players are Britannia, HLL, ITC, Parle, Priya Gold, and Cremica.
The grain-based snack market, comprising extruded snacks and savories, is estimated at
around rs. 29 billion ($667 million). Of this, the organized segment contributes only 15
percent of sales. Major players are Pepsi, Haldiram, SM Dyechem, Bikanerwala, etc.
Breakfast cereal production in the organized sector is very small, and is mainly confined
to corn flakes. Major producers are Kellogg’s and Mohan Meakins. Pepsi is reportedly
interested in investing in the breakfast segment over the next five years.
Domestic consumer goods are distributed through a multi-level distribution system. With
the cost of establishing warehouses nearly prohibitive, clearing and forwarding agents
(CFAs) are fast becoming the norm. Typically, the CFAs transport merchandise from the
factory or warehouse to “stockists” or distributors. While the CFAs do not take title to the
product, they receive 2 to 2.5 percent margins, invoice the stockists, and receive payment
on behalf of the manufacturer. The stockists have exclusive geographical territories and a
sales force that calls on both the wholesalers and on large retailers in urban areas. They
usually offer credit to their customers and receive margins in the range of 3 to 9 percent.
The wholesalers provide the final link to those rural and smaller retailers who cannot
purchase directly from the distributors. Sales to these retailers are typically in cash only
and the wholesalers receive a margin of 2 to 3 percent. Margins for retailers range from 5
to 15 percent, and the total cost of the distribution network represents between 10 and
20 percent of the final retail price.
Most imported food products are transshipped through regional hubs such as Dubai and
Singapore, due to their liberal trade policies and efficient handling facilities. Major
importers are located in Mumbai, Kolkata, Delhi, and Chennai. Although a large share of
imported foods enter India through illegal smuggling, normal imports are also increasing.
Under-invoicing is a commonly used practice to lessen the burden of import tariffs.
5.17 Finding a Business Partner
It is essential to survey existing and potential markets for products before initiating
export sales to India. Market research firms in India can assist new exporters. If the
aspiring FVG companies have products of promising sales potential in India, they can
either set up a base in India or appoint a distributor or an agent. If possible, setting up a
base is preferable, because Indians like to see foreign companies investing in their
country rather than selling from abroad. FVG companies should avoid the temptation to
establish a relationship with an agent/distributor merely because he is the most persistent
suitor. Consider the following before selecting an agent/distributor:
9 Determine who their potential customers are, and where in India these
customers are located, through surveys.
9 Recognize that agents with fewer principals and smaller set-ups often are
more adaptable and committed than those with large infrastructure and big
reputations.
9 FVG firms should examine all distributor prospects, and thoroughly research
the more promising ones. Check the potential agent’s reputation through
local industry/trade associations, potential clients, bankers, and other
foreign companies/missions.
Suku Shah, the chairman and managing director of Olive Tree Trading Pvt Ltd is one of
the leading importers of Italian and Japanese high end food products. Interaction with him
gives an in-depth insight in to the status of imported food industry and the market today
in India.
The imported food industry is undergoing a rapid change in India. Until last decade when
packaged food was quite unacceptable, today it’s become a serving at every household.
The working Indian woman is changing the way food is cooked, served. Gone are the days
when imported food were assumed to be preserved with harmful additives, with the food
processing industry advancement and natural preservatives usage in packaged food, the
consumption of packaged food is definitely heading towards peak.
When asked what the mistakes are made by the Italian companies while entering India,
the quick answer from Suku Shah is- the choice of a wrong partner. He believes that the
vision, mission and attitudes of the Italian companies and the Indian partner need to
match. Most of the times the high end products are placed in a wrong segment and
undersold, it’s a mistake by both parties. The Indian counterpart has obviously not
understood what segment the Italian brand should be placed in.
Another major problem is under voicing. Packaged food is still a protected segment due
to which the duties levied on the products are extremely high, about 30-32%. Hence it is
not uncommon for under voicing to occur. The Italian companies have to ensure that the
product is not under voiced, though it looks like an attractive measure to avoid taxation, it
doesn’t work on the long run and eventually the brand suffers in the market.
There is a lot of scope for the high end market products. Usually the pricing policy is
dependent on the competition, product quality, acceptability of the product, once the
product make a footmark in the market, it on the growth phase of the lifecycle. There is a
very small retail market for these products; individual shops with right mix of products
can be one of the best ways of entering the market.
1. What are the types of products imported by Fortune Gourmet to India from
Italy?
A. Cheese- Processed Pork-Porcini-Processed Fish (Expected soon)-Pasta- Extra
Virgin Olive Oil-Balsamic Vinegar
2. Could you in brief describe the markets for the following products:
- fish and crustaceans;- We will try out processed fish in the next few months.
South Asia may be cheaper for non processed fish
- milk and cheese products;- We buy extensive quantities of Italian cheese of all
types. Italian food is popular in India but duties and other taxes make the cheese
expensive and out of reach of many customers.
- olive oil;- The market is saturated with lower price oils. We deal in small
quantities of very high end products.
5. Are there in products imported by Fortune Gourmet from the FVG region?
A. We do not know the FVG region. We have our suppliers for each class of products
and they produce from all over Italy.
6. What are the differences between the Indian and imported products for
the category of products in question 2?
A. Imported products are more expensive because of freight duty and other taxes. The
perceived quantity is higher and the packaging is usually better. Usually there is a
advantage in quantity and appeal to offset their higher prices.
7. What kind of risks are involved in this business, eg Country risk, Currency
risk, Non collection of goods, Non payment etc?
A. Country Risk: Indian foreign exchange position and overall economic strength make
country risk almost zero.
9. What are the pricing policies for the products mentioned in question 2?
A. Pricing policy depends on market acceptability, competition and safeguards against
currency fluctuations.
6.3 PRECAUTIONS TO BE TAKEN BY ITALIAN EXPORTERS
Amongst the precautions to be taken by Italian Exporters to India, according to Mr. Ashish
Gupta, Representative of BPVN Group in India are the following:-
With new customers, Italian exporters should always insist on an irrevocable L/C or any
other form of a bank guarantee.
In cases where the Indian customer is unwilling to open an L/C due to cost issues or lack
of limits with his bank, the Italian exporter should insist on cash against documents
system ( documents to be delivered against payment by the bank).
Documents should always be routed through the Indian Bank with clear disposal
instructions
An opinion report on a new customer from the Bank of the Indian importer should be
sought which would give an indication of the company’s dealings ( whether satisfactory or
not in their opinion).
In case of non-payment, the importers bank in India should be requested to protest the
acceptance of the drafts at the earliest.
Where the amounts involved are significant, assistance of a law firm with expertise in the
field should be sought.
PART 7 PRICE POLICIES
Landed cost (FOB + freight + insurance) + Basic duty +Countervailing duty = excise duty
(production duty) +Special additional duty +Educational cess (2%) +Clearing and
forwarding cost + Octroi (a local government entry tax)= Landed price to importer
Item Rate
Sea Freight, Insurance etc/1 14%
Reforms by India in opening up its economy have greatly improved trade prospects – but
major barriers still exist, with tariff rates among the highest in the world.
The Indian Government continues to impose relatively high tariffs on imports and
maintain non-tariff barriers. Import tariffs on most consumer food products range from 31
per cent to 52 per cent, while sensitive items such as alcoholic beverages continue to
attract much higher duties (143-592 per cent).
India also has various duties, including safeguard and anti-dumping fees, and non-tariff
restrictions such as import bans.
To encourage future trade growth, the International Monetary Fund is urging continued
tariff reduction and the lowering of administrative barriers.
Agrifood imports into India are subject to a range of duties, which include:
-Basic customs duty.
-Additional duty or countervailing duty (equal to the excise charged on similar domestic
products,usually about 16 per cent).
-Education Cess (a special two per cent surcharge on all direct and indirect taxes).
The basic duty is 30 per cent, but there is a range of food items where it is much higher,
including wine, other alcohol, wheat, rice, corn, coffee, tea, vegetable oils and some
horticultural products.
The Indian Customs tariff, which shows import duties and excise rates on all products, can
be found at the India Central Board of Excise and Customs website.
The duties have a cumulative effect, with the Education Cess being applied at each step.
This means that the basic import duty is applied to the CIF (cost, insurance and freight)
value of the product when it arrives at the Indian port, the Education Cess is applied to
the value plus duty, the countervailing duty is then applied to the total and finally the
Education Cess is applied again.
There are several different statistical and trade classification systems used in relation to
agrifood and agricultural trade.
Tariff quotas are imposed by India on imports of milk powder, maize, crude sunflower-
seed and safflower oil, and refined rape, colza, and mustard oil.
For example, imports of up to 10,000 tonnes of milk powder may enter annually at an in-
quota tariff rate of 15 per cent, with an out-of-quota rate of 60 per cent. The rates are the
same for maize (other than seeds, HS 1005.90), for which the current tariff quota is
500,000 tonnes.
Quotas for maize are placed at the disposal of the Agricultural and Processed Food
Products Export Development Authority (APEDA) and are currently allocated to state
trading companies. These include the National Agricultural Cooperative Marketing
Federation (NAFED), Minerals and Metals Trading Corporation (MMTC), State Trading
Corporation (STC), the Project and Equipment Corporation (PEC), State Cooperative
Marketing Federations, and actual users of maize for poultry and cattle feed and starch
manufacture.
For crude sunflower-seed and safflower oil, the in-quota rates are 50 per cent and out-of-
quota 75 per cent, while for refined rape, colza and mustard oil, the in-quota rate is 45
per cent and out-ofquota 85 per cent.
Most of the states in India have adopted the value-added tax (VAT) system. The
exceptions – the states of Uttar Pradesh and Tamil Nadu and the union territory of
Pondicherry – are also expected to implement VAT in time.
VAT is under which tax is charged at each stage of sale on the value added to the goods.
In practice, the business selling the goods collects tax on the full price, subtracts tax
which has been charged along the way, and deposits the balance with the Government
treasury. This means that only the value addition in the hands of each business is subject
to tax.
The VAT rate for most processed food categories such as canned fruits and preserves, is
four per cent, while others such as biscuits and confectionary are taxed at 12.5 per cent.
The introduction of VAT has meant that all other taxes, including turnover tax, resale tax,
surcharge and additional tax, have been abolished.
Another tax applicable to the food market is Central Sales Tax at four per cent, which only
applies on the sale or purchase of goods interstate. There is a proposal to gradually
eliminate this tax.
Some State municipal corporations also impose octroi (specific municipal taxes), market
cess and entry tax. The State of Karnataka has market cess but not octroi or entry tax.
Commercial samples are exempt from normal leviable customs duty, providing the
following conditions are met:
The goods are imported as personal baggage by bona fide commercial travelers and
business people or imported by post or air.
The products are clearly marked as samples with full documentation, and their value does
not exceed about A$1400 (or 15 units) over a 12-month period.
They are imported into India for securing or executing an export order.
SECTION B: GENERAL OVERVIEW
INDIA- ECONOMIC OVERVIEW
India's economy is on the fulcrum of an ever increasing growth curve. With positive
indicators such as a stable 8 per cent annual growth, rising foreign exchange reserves of
close to US$ 166 billion, a booming capital market with the popular "Sensex" index
topping the majestic 13,000 mark, the Government estimating FDI flow of US$ 12 billion
in this fiscal, and a more than 22 per cent surge in exports, it is easy to understand why
India is a leading destination for foreign investment.
• The economy has grown by 8.9 per cent for the April-July quarter of ’06-07, the
highest first-quarter growth rate since '00-01.
• The growth rate has been spurred by the manufacturing sector, which has logged
an 11.3 per cent rise in Q1 ’06-07, according to the GDP data released by the
Central Statistical Organisation. It was 10.7 per cent in the corresponding period of
the last fiscal year. The GDP numbers come just weeks after the monthly IIP growth
figures have touched 12.4 per cent.
• Agriculture, which accounts for nearly a quarter of the GDP, has also grown by a
healthy 3.4 per cent, unchanged from the corresponding period of last fiscal.
• Other propellers of GDP growth for the first quarter this fiscal have been the trade,
hotels, transport and communications sector which grew by 9.5 per cent and
construction, which grew by 13.2 per cent. In the corresponding period of last
fiscal, these sectors grew by 11.7 per cent and 12.4 per cent, respectively.
• Electricity also grew by 5.4 per cent this first quarter as opposed to 7.4 per cent in
the same period last year. The overall growth in this sector was fuelled by growth in
July and August. The services sector also grew by 10.6 per cent in the first quarter
of ’06-07. It was only 9.8 per cent last year in the same period.
• There has been exceptional growth rate in some specific industries, like commercial
vehicles at 36 per cent, telephone connections, by 48.9 per cent and passenger
growth in civil aviation by 32.2 per cent.
Some highlights:
• India has more billionaires than China. This year there were 15 billionaires in China
but last year in India, there were 20 billionaires, according to the Forbes magazine.
• India has emerged as the world's fastest growing wealth creator, thanks to a
buoyant stock market and higher earnings.
• A number of Indian companies surpassed last year's net profit in just six months of
the current fiscal, reflecting an accelerated growth in corporate earnings.
• Forty-four per cent of Top 100 Fortune 500 companies are present in India.
With its manufacturing and services sector on a searing growth path, India’s economy
may soon touch the coveted 10 per cent growth figure.
By 2025 the Indian economy is projected to be about 60 per cent the size of the US
economy. The transformation into a tri-polar economy will be complete by 2035, with the
Indian economy only a little smaller than the US economy but larger than that of Western
Europe. By 2035, India is likely to be a larger growth driver than the six largest countries
in the EU, though its impact will be a little over half that of the US.
India, which is now the fourth largest economy in terms of purchasing power parity, will
overtake Japan and become third major economic power within 10 years.
India - a growing economy
A growth rate of above 8% was achieved by the Indian economy during the year 2003-04
and in the advanced estimates for 2004-05, Indian economy has been predicted to grow at
a level of 6.9 %. Growth in the Indian economy has steadily increased since 1979,
averaging 5.7% per year in the 23-year growth record. In fact, the Indian economy has
posted an excellent average GDP growth of 6.8% since 1994 ( the period when India's
external crisis was brought under control). However, in comparison to many East Asian
economies, having growth rates above 7%, the Indian growth experience lags behind. The
tenth five year plan aims at achieving a growth rate of 8% for the coming 2-3 years.
Though, the growth rate for 2004-05 is less than that of 2003-04, it is still among the high
growth rates seen in India since independence. Many factors are behind this robust
performance of the Indian economy in 2004-05. High growth rates in Industry & service
sector and a benign world economic environment provided a backdrop conducive to the
Indian economy. Another positive feature was that the growth was accompanied by
continued maintenance of relative stability of prices. However, agriculture fell sharply from
its 2003-04 level of 9 % to 1.1% in the current year primarily because of a bad monsoon.
Thus, there is a paramount need to move Indian agriculture beyond its centuries old
dependency on monsoon. This can be achieved by bringing more area under irrigation and
by better water management.
The main contributors to capital account surplus were the banking capital inflows, foreign
institutional investments and other capital inflows. Alike current account, capital account
too witnessed decline. The capital account surplus in April-September was also down by
around US $ 1.5 million.
Reserve money growth had doubled to 18.3% in 2003-04 from 9.2 in 2002-03, driven
entirely by the increase in the net foreign exchange assets of the RBI. However, it declined
to 6.4% in the current year to January 28, 2005. During the current financial year 2004-
05, broad money stock (M3) (up to December 10, 2004) increased by 7.4 per cent
(exclusive of conversion of non-banking entity into banking entity, 7.3 per cent) as
compared with the growth rate of 10.3 per cent registered during the corresponding period
of the last year.
The downward trend in interest rates continued in 2004-05, with bank rate standing at 6%
as on Dec 10, 2004. Banks recovery management improved considerably with gross NPAs
declining from Rs 70861 crore in 2001-02 to Rs 68715 in 2002-03. During the current
financial year (up to December 10, 2004) incremental gross bank credit increased by 20.5
per cent (exclusive of conversion, 16.6 per cent) as compared with a growth of 5.9 per
cent in the same period of the previous year. Non-Food credit during the financial year so
far, registered a growth of 20.5 per cent (exclusive of conversion, 16.5 per cent) as
compared with an increase of 8.4 per cent during the same period of the last year
indicated a positive outlook. Equity market return was 85% in 2003-04, second highest in
Asia. With continued higher corporate earnings in 2004-05, the sensex crossed 6800 mark
in March 2005 but high stock market volatility remained higher in India compared to other
Asian countries. The expectation of sensex crossing 7 K mark is not yet realized. Fiscal
deficit of states & center was decreasing in early 90s but due to rise in fiscal deficit in
recent years, corrective measures have been adopted. The fiscal deficit decreased to 7.9%
in 2004-05 from a 9.4% of GDP in 2003-04. According to recent estimates, fiscal deficit in
April-October 2004 is 45.2 per cent of BE compared with 56.0 per cent of BE in the
corresponding period last year.
Agriculture
More than 58% of country's population depends on agriculture, a sector producing only
22% of GDP. The agriculture and allied sector witnessed a growth of 9.1% in 2003-04,
which fell steeply to 1.1% in the current fiscal year. Favourable monsoon facilitated an
impressive growth rate of 9.6% in 2003-04 on the back of negative growth in the
preceding year. However, deficient rainfall from the southwest monsoon is estimated to
have caused a significant decline in kharif crops production in the current year.
While looking at some of the agricultural products, one finds that India is the largest
producer of Tea, jute and jute like fibre. India is not only the largest producer but also
largest consumer of tea in the world. India accounts for around 14% of the world trade in
tea. Indian tea is exported in various forms such as bulk tea, packet tea, tea bags, instant
tea etc, to more than 80 countries of the world. Among livestock cattle and buffalo are
found maximum in India. Indian total milk production is highest in the world. India has
also the privilege of having the 1st rank in total irrigated land in area terms in the world.
Among cereals production, India is placed third, having second largest production in wheat
and rice and the largest production in pulses. However, the full potential of Indian
agriculture as a profitable activity hasn't been realized yet. Agriculture upliftment will not
only benefit farmers and a large section of the rural poor, but also will give fillip to overall
growth of the economy through the backward and forward linkages of agriculture with the
rest of the economy.
Priority must be given to livestock's & fisheries, horticulture, organic farming, commercial
crops and agro-processing, as these are the potential areas of high growth. Further,
rationalization of minimum support price regime and introduction of other risk- mitigation
measures, improvements in rural infrastructure are essential for sustaining high
agricultural growth. It is conceived that reforms in legislations, strengthening R&D and
improvements in post harvest management technologies will give a further boost to Indian
agriculture. While acceleration in agriculture growth to 4 - 4.5% is imperative, even with
such growth rate; share of agriculture in total GDP is likely to reduce further. Therefore,
there is a need to absorb excess agricultural labour in other sectors, notably industry.
Rapid growth of agro - processing industry close to the agricultural production centers can
bring about this shift without moving people from rural to urban areas. Also, public
investment in agriculture needs to be augmented, especially in rural infrastructure,
irrigation, and agricultural research & development. Better access to institutional credit for
more farmers, is also high on priority list. The New trade policy gives focus to agriculture
and all the hurdles in Indian agriculture will be crossed gradually.
Industry
Index of industrial production which measures the overall industrial growth rate was 10.1%
in October 2004 as compared to 6.2% in October 2003. The double digit in IIP was aided
by a robust growth of 11.3% in the manufacturing sector followed by mining and quarrying
and electricity generation. But industrial production saw a decline in Dec 2004 when IIP
dipped to 8 %. Thus one of the critical challenges facing Indian economic policy consists in
devising strategies for sustained industrial growth. Final phase-out of the MFA and India's
conformity with the international intellectual property system from Jan 1st Jan 2005, have
been two significant developments in the world of commerce & industry.
Textile industry is the largest industry in terms of employment economy from the current
US $37 billion to $ 85 billion by 2010 creation of 12 million new jobs in the textile sector
and modernization & consolidation for creating a globally competitive textile industry. With
the phasing out of quota regime under MFA, from Jan 1st 2005, developing countries
including India with both textile & clothing capacity may be able to prosper.
Automobile sector has demonstrated the inherent strengths of Indian labour and capital.
The pharma industry and the IT industry are two sunrise sectors for India. Among the
sectors that have experienced the greatest transformation in India, the pharmaceutical is
perhaps the most significant.
India's WTO involvement during the last decade has encouraged our pharma companies to
adopt a strategy of R & D based innovative growth. Indian pharma exports were 14000
crore Rupees & accounts for more than a third of the industry's turnover. Apart from
manufacture of drugs, the pharma industry offers huge for outsourcing of clinical research.
A vast pool of scientific and technical personnel & recognized expertise in medical
treatment & health care are India's strength, India can take advantages of its strength
once patent protection is given to the result of the researches. By participating in the
international system of intellectual property protection, India unlocks for herself vast
opportunities in both exports as well as her potential to become a global hub in the area of
R & D based clinical research outsourcing, particularly in the area of bio-technology.
The three main sub sectors of industry viz Mining & quarrying, manufacturing, and
electricity, gas & water supply recorded growths of 5%, 8.8% and 7.1% respectively.
Apart from infrastructure, particularly adequate and reliable power supply at reasonable
cost and transportation facilities, there is need for stepped up investment in
manufacturing. Industry needs to grow rapidly not only to boost the overall growth rate in
the economy but also to generate gainful employment for the existing unemployed, as well
as the new entrants. In a diverse range of industrial activities, several Indian firms have
succeeded in getting integrated into global production chains and realized rapid growth of
exports. This experience suggests that with appropriate scale, investment and technology,
rapid industrial growth is indeed possible.
Services
Service sector has maintained a steady growth pattern since 96-97, except into a fall in
2000-01. Trade hotels, transport & communications have witnessed the highest growth of
level 10.9% in 2004, followed by financial services (With a overall growth rate of (6.4) %
and community, social & personal services (5.9)% of all the three sectors, services have
been the highest contributor to total GDP growth rate.
While in most parts of the developed world, the services sector's share of employment rose
faster than its share of output in India there has been a relatively slow growth of jobs in
the service sector. This is primarily because of the rise in labour productivity in services in
sectors such as information technology that is dependent on skilled labour. Growth in
tourism and tourism - related services such as hotels, holds a large potential for
employment generation.
IT enabled services, such as Business Process Outsourcing have been growing rapidly in
the recent past and will continue to rise. India's large number of English speaking skilled
manpower has made India a major exporter of software services and software workers.
However, the emergence of somewhat inexplicable protectionist tendencies in some
developed countries is a disturbing trend. At the same time it is important that India sees
BPO in a larger perspective, than the Internet, as India's share is just $ 3.5 billion in
December 2004 compared to the global market of US $ 178 billion. Also India outsourcing
companies need to work more closely with their customers. In the complex BPOs,
customers would like to have hybrid processes to control value. Indian companies need the
right mix of domain expertise and process expertise, further, mere knowledge of English is
not sufficient; management skills are also needed. Education for the offshoring industry
needs to be given impetus too.
The beginning of New Year saw Tsunami, a worst ever disaster, which killed thousands of
people in India, Sri Lanka, Indonesia & Thailand. Many of them were international tourists.
The disaster was expected to have a negative impact on India's tourism in terms of large-
scale cancellations of tourists to India but nothing of that sort was seen. In fact, tourist
arrivals in India rose 23.5 percent in Dec 2004 and tourist arrivals crossed 3 million mark
for the first time in 2004.
PART 8 INFORMATION SOURCES
FVG companies interested in exporting to India may contact the following for current
information:
C. Phytosanitary issues
E. Ministry of Commerce
Joint Secretary
Ministry of Food Processing Industries
Panch Sheel Bhawan
August Kranti Marg
New Delhi - 110 049
Phone: (91-11)26492475
Fax: (91-11)26493228
E-mail: anpsinha@mofpi.delhi.nic.in
Website: http://mofpi.nic.in/
G. Registry of Trademarks
Chairman
Central Board of Excise & Customs
Ministry of Finance
North Block
New Delhi - 110 001
Phone: (91-11)23092849
Fax: (91-11)23093215
E-mail: cbecoff@finance.delhi.nic. in
Website:www.cbec.gov.in
Imports into India are subject to a high, confusing array of duties, which include the
following: a "basic" duty, an Additional Duty (AD), also known as “Countervailing Duty
(CVD),” and an Education Cess (a special surcharge on all direct and indirect taxes
introduced in last year’s Budget on July 8, 2004).
The basic duty on most processed food products is 30 percent. Exceptions in the
agriculture/food group include “sensitive” items such as wine, liquor, poultry meat, wheat,
rice, corn, coffee, tea, vegetable oils, cigarettes and tobacco, and several dairy products,
which attract much higher basic duties. The CVD equals the excise duty on similar
products produced domestically (16 percent on most consumer food products), and is
levied on the total of the assessed value plus the basic duty. The calculation of the CVD
on packaged goods is based on the Maximum Retail Price (MRP), minus the abatement
notified for similar domestic goods in India, which makes the calculation more difficult.
Total import tariffs on most consumer food products range from 31 percent to 52 percent.
For a product attracting a 30 percent basic duty, a 16 percent AD, and the 2 percent EC,
the total applied import tariff will not be 48 percent as one might think (30+16+2), but
rather 52.2 percent. The import duty calculation is as follows:
Attestation
Title of Requesting
Products required on Purpose
Certificate Ministry
Certificate
Plants and Phytosanitary Additional Prevent introduction Ministry of
Plant Certificate declaration per of exotic pest and Agriculture
Products the specific diseases.
conditions
mentioned in
the import
permit. 1/
Animals and Sanitary Additional Prevent introduction Ministry of
Animal Health declaration per of exotic pests and Agriculture
Products Certificate the specific diseases, and avoid
conditions human health risks
mentioned in due to microbial &
the import chemical
permit. 2/ contamination.
Notes:
1/ For specific conditions applicable for different commodities, please refer to the Plant
Quarantine (Regulation of Imports Into India) Order 2003, as amended, at:
http://agricoop.nic.in/gazette/gazette.htm, and
www.plantquarantineindia.org/PQO_amendments.htm
2/ The specific conditions applicable for different dairy and animal products may not be
readily available. However, general procedures for the importation of livestock and
related products to India under the Livestock Importation Act, 1898, are available at:
http://dahd.nic.in/order/livestockimport.doc
India’s current import regulations do not require any specific export certificates from the
country of origin for imports of processed food products, including products in consumer
packages. However, all processed food and beverages products imported into India
should meet requirements under various domestic food laws, such as:
o The Prevention of Food Adulteration (PFA) Act, 1954, and PFA Rules of 1955, as
amended.
o The Standards and Weights and Measures Act, 1976
o Meat Food Products Order, 1992
o Milk and Milk Products Order, 1992
o Fruit Products Order, 1955
Imported food products such as milk powder, condensed milk, and infant food should
comply with Indian quality standards (http://www.bis.nic.in)
The domestic food laws/standards apply equally to domestic and imported products. At
the port of entry, the food products are sampled and tested by inspectors from the
Ministry of Health, and the consignment is cleared only if it meets the requirements of the
domestic laws/standards.
9.4 Purpose Of The Export Certificates
Historically, India has had a highly restrictive import market for food and agricultural
products. Although quantitative import restrictions on most agricultural products were
removed effective April 1, 2001, non-tariff barriers, including phytosanitary and sanitary
restrictions, were introduced.
Imports of plants and plant products are subject to a "Bio-security & Sanitary-
Phytosanitary Import Permit" issued by the Department of Agriculture and Cooperation,
Ministry of Agriculture, per the conditions of the Plant Quarantine (Regulation of Imports
into India) Order (PQO) 2003, as amended. The importer applies for an import permit
and submits it to the exporter, who in turn acquires the required phytosanitary certificate
from the exporting country’s authorities. The relevant authority in the country of export
issues the phytosanitary certificate based on the specific conditions as stated on the
import permit.
Similarly, imports of animals and animal products (including meat and meat products) are
subject to a "Sanitary Import Permit" issued by the Department of Animal Husbandry and
Dairying, Ministry of Agriculture, per the conditions of Livestock Importation Act, 1898.
The relevant authority in the country of export must issue a sanitary certificate based on
the specific conditions as stated on the import permit.
The attestation for both of the above-mentioned export certificates should meet all
specific conditions stated in the respective import permits. These conditions vary from
commodity to commodity, and may change over time.
The original export certificates should accompany each individual export consignment of
the product at the time of entry into India. The government of India does not accept
export declarations by suppliers or manufacturers as proof of compliance. However, in
certain cases, the Government of India may allow export certificates containing specific
declarations from the import permit by organizations accredited by the government of the
exporting country. The government of the exporting country has to apply to the Ministry
of Agriculture for this special approval.
This certificate should mention the order number, container number, port of discharge,
buyer’s name, and product description, along a declaration along the following lines:
“The undersigned for (relevant organization) declares that the following mentioned goods
as consigned above (or below) are the products of the Italy (or any country of origin). We
hereby certify goods to be of Italy (or any country) origin.”
General Provisions, according to the ministry of commerce, regarding imports to India is
given below:
Every exporter or importer shall comply with the provisions of the Foreign Trade
(Development and Regulation) Act, 1992, the Rules and Orders made thereunder,
the provisions of this Policy and the terms and conditions of any
Licence/certificate/permission/Authorisation granted to him, as well as provisions
of any other law for the time being in force. All imported goods shall also be subject
to domestic Laws, Rules, Orders, Regulations, technical specifications,
environmental and safety norms as applicable to domestically produced goods. No
import or export of rough diamonds shall be permitted unless the shipment parcel
is accompanied by Kimberley Process (KP) Certificate required under the procedure
specified by the Gem & Jewellery Export Promotion Council (GJEPC).
Interpretation of Policy
Procedure
The Director General of Foreign Trade may, in any case or class of cases, specify the
procedure to be followed by an exporter or importer or by any licensing or any
other competent authority for the purpose of implementing the provisions of the
Act, the Rules and the Orders made thereunder and this Policy. Such procedures
shall be included in the Handbook (Vol.1), Handbook (Vol.2), Schedule of DEPB
Rate and in ITC(HS) and published by means of a Public Notice. Such procedures
may, in like manner, be amended from time to time. The Handbook (Vol.1) is a
supplement to the Foreign Trade Policy and contains relevant procedures and other
details. The procedure of availing benefits under various schemes of the Policy are
given in the Handbook (Vol.1).
Any request for relaxation of the provisions of this Policy or of any procedure, on
the ground that there is genuine hardship to the applicant or that a strict
application of the Policy or the procedure is likely to have an adverse impact on
trade, may be made to the Director General of Foreign Trade for such relief as may
be necessary. The Director General of Foreign Trade may pass such orders or grant
such relaxation or relief, as he may deem fit and proper. The Director General of
Foreign Trade may, in public interest, exempt any person or class or category of
persons from any provision of this Policy or any procedure and may, while granting
such exemption, impose such conditions as he may deem fit. Such request may be
considered only after consulting Norms Committee (NC) if the request is in respect
of a provision of Chapter-4 (excluding any provision relating to Gem & Jewellery
sector) and EPCG Committee if the request is in respect of a provision of Chapter-5
of the Policy/ Procedure. However, any such request in respect of a provision other
than Chapter-4, Chapter-5 and Gem & Jewellery sector as given above may be
considered only after consulting Policy Relaxation Committee.
Principles of Restriction
DGFT may, through a notification, adopt and enforce any measure necessary for:-
i Protection of public morals.
ii Protection of human, animal or plant life or health.
iii Protection of patents, trademarks and copyrights and the prevention of deceptive
practices.
iv Prevention of use of prison labour.
v Protection of national treasures of artistic, historic
or archaeological value.
vi Conservation of exhaustible natural resources.
vii Protection of trade of fissionable material or
material from which they are derived; and
viii Prevention of traffic in arms, ammunition and
implements of war.
Restricted Goods
Any goods, the export or import of which is restricted under ITC(HS) may be
exported or imported only in accordance with a licence/ certificate/ permission or a
public notice issued in this behalf.
Penalty
Any goods, the import or export of which is governed through exclusive or special
privileges granted to State Trading Enterprise(s), may be imported or exported by
the State Trading Enterprise(s) as specified in the ITC(HS) Book subject to the
conditions specified therein. The Director General of Foreign Trade may, however,
grant a Licence/certificate/ permission/Authorisation to any other person to import
or export any of these goods. In respect of goods the import or export of which is
governed through exclusive or special privileges granted to State Trading
Enterprise(s), the State Trading Enterprise(s) shall make any such purchases or
sales involving imports or exports solely in accordance with commercial
considerations, including price, quality, availability, marketability, transportation and
other conditions of purchase or sale. These enterprises shall act in a non
discriminatory manner and shall afford the enterprises of other countries adequate
opportunity, in accordance with customary business practices, to compete for
participation in such purchases or sales.
Import of samples
Import of Gifts
Import of gifts shall be permitted where such goods are otherwise freely importable
under this Policy. In other cases, a Customs Clearance Permit (CCP) shall be
required from the DGFT.
New or second hand capital goods, equipments, components, parts and accessories,
containers meant for packing of goods for exports, jigs, fixtures, dies and moulds
may be imported for export without a Licence/certificate/permission/ Authorisation
on execution of Legal Undertaking/Bank Guarantee with the Customs Authorities
provided that the item is freely exportable without any conditionality/requirement of
Licence/ permission as may be required under ITC(HS) Schedule II.
Sale of goods on high seas for import into India may be made subject to this Policy
or any other law for the time being in force.
Clearance of Goods from Customs
Wherever any duty free import is allowed or where otherwise specifically stated, the
importer shall execute a Legal Undertaking (LUT)/Bank Guarantee (BG)/ Bond with
the Customs Authority before clearance of goods through the Customs, in the
manner as may be prescribed. In case of indigenous sourcing, the Licence/
certificate/ permission holder shall furnish LUT / BG / Bond to the licensing
authority before sourcing the material from the indigenous supplier/nominated
agency.
All the exporters who have an export turnover of at least Rupees 5 crore in the
current or preceding licencing year and have a good track record of three years of
exports will be exempted from furnishing a BG for any of the schemes under this
Policy and may furnish a LUT in lieu of BG.
Private/Public bonded warehouses may be set up in the Domestic Tariff Area as per
the terms and conditions of notification issued by Department of Revenue. Any
person may import goods except prohibited items, arms and ammunition,
hazardous waste and chemicals and warehouse them in such private/public bonded
warehouses. Such goods may be cleared for home consumption in accordance with
the provisions of this Policy and against Licence/certificate/ permission, wherever
required. Customs duty as applicable shall be paid at the time of clearance of such
goods.
If such goods are not cleared for home consumption within a period of one year or
such extended period as the custom authorities may permit, the importer of such
goods shall reexport the goods.
The Reserve Bank of India (RBI) established in 1935, is the central bank of the country. Its
role is four-fold:
It manages the country’s foreign exchange reserves and prescribes exchange control
norms to facilitate external trade and payment
The banking system in India comprises scheduled commercial banks, urban and state
cooperative banks, and regional rural banks. Scheduled commercial banks, in turn, can be
categorised into public sector banks, private sector banks and foreign banks. Besides
banks, another segment of players in the Indian financial system, are non-banking
financial companies (NBFcs).
This segment comprises 28 banks, including the State Bank of India and its seven
subsidiary banks. It is the dominant segment in the banking industry. The central
government is its majority shareholder, holding more than 51 per cent equity stake in all
the public sector banks, although its shareholding has decreased over the years.
This segment comprises 28 banks, including seven new private sector banks and 21 old
private sector banks. The new private sector banks are growing rapidly in size and the last
couple of years have witnessed some mergers and acquisitions.
This segment comprises 29 banks, including most of the leading international banks,
although their presence is restricted to the metropolitan and large cities. Currently, there
are several restrictions on foreign banks with respect to the expansion of branch network,
location of new branches and acquisition of shareholding in Indian banks. However, the RBI
has recently come out with a road map for deregulation of foreign banks.
All commercial banks are expected to implement Basel II norms with effect from March 31,
2007
From April 2009, RBI proposes to accord full national treatment to wholly-owned
subsidiaries of foreign banks.
List of Commercial Banks
S.No Names of Commercial Banks Type of Bank
1 ABN AMRO Bank N.V. Private Foreign Bank
2 Abu Dhabi Commercial Bank Ltd. Private Foreign Bank
3 American Express Bank Ltd. Private Foreign Bank
4 Arab Bangladesh Bank Limited Private Foreign Bank
5 Allahabad Bank Nationalized Bank
6 Andhra Bank Nationalized Bank
7 Antwerp Diamond Bank N.V. Private Foreign Bank
8 Bank Internasional Indonesia Private Foreign Bank
9 Bank of America N.A. Private Foreign Bank
10 Bank of Bahrain & Kuwait BSC Private Foreign Bank
11 Barclays Bank Plc Private Foreign Bank
12 BNP PARIBAS Private Foreign Bank
13 Bank of Ceylon Private Foreign Bank
14 Bharat Overseas Bank Ltd. Indian Private Bank
15 Bank of Baroda Nationalized Bank
16 Bank of India Nationalized Bank
17 Bank of Maharashtra Nationalized Bank
18 Canara Bank Nationalized Bank
19 Central Bank of India Nationalized Bank
20 Calyon Bank Private Foreign Bank
21 Citibank N.A. Private Foreign Bank
22 Cho Hung Bank Private Foreign Bank
23 Chinatrust Commercial Bank Ltd. Private Foreign Bank
24 Centurion Bank of Punjab Limited Indian Private Bank
25 City Union Bank Ltd. Indian Private Bank
26 Coastal Local Area Bank Ltd. Indian Private Bank
27 Corporation Bank Nationalized Bank
28 Catholic Syrian Bank Ltd. Indian Private Bank
29 Deutsche Bank AG Private Foreign Bank
30 Development Credit Bank Ltd. Indian Private Bank
31 Dena Bank Nationalized Bank
32 IndusInd Bank Limited Indian Private Bank
33 ICICI Bank Indian Private Bank
34 IDBI Bank Limited Indian Private Bank
35 Indian Bank Nationalized Bank
36 Indian Overseas Bank Nationalized Bank
37 Industrial Development Bank of India Other Public Sector-Indian Banks
38 ING Vysya Bank Indian Private Bank
J P Morgan Chase Bank, National Private Foreign Bank
39 Association
Krung Thai Bank Public Company Private Foreign Bank
40 Limited
41 Kotak Mahindra Bank Limited Indian Private Bank
42 Karnataka Bank Indian Private Bank
43 Karur Vysya Bank Limited. Indian Private Bank
44 Lord Krishna Bank Ltd. Indian Private Bank
45 Mashreqbank psc Private Foreign Bank
46 Mizuho Corporate Bank Ltd. Private Foreign Bank
47 Oman International Bank S A O G Private Foreign Bank
48 Oriental Bank of Commerce Nationalized Bank
49 Punjab & Sind Bank Nationalized Bank
50 Punjab National Bank Nationalized Bank
51 Societe Generale Private Foreign Bank
52 Sonali Bank Private Foreign Bank
53 Standard Chartered Bank Private Foreign Bank
54 State Bank of Mauritius Ltd. Private Foreign Bank
SBI Commercial and International wholly owned subsidiary of SBI
55 Bank Ltd.
56 State Bank of Bikaner and Jaipur SBI Associate Bank
57 State Bank of Hyderabad SBI Associate Bank
58 State Bank of India SBI Associate Bank
59 State Bank of Indore SBI Associate Bank
60 State Bank of Mysore SBI Associate Bank
61 State Bank of Patiala SBI Associate Bank
62 State Bank of Saurashtra SBI Associate Bank
63 State Bank of Travancore SBI Associate Bank
64 Syndicate Bank Nationalized Bank
65 The Bank of Nova Scotia Private Foreign Bank
66 The Bank of Tokyo-Mitsubishi, Ltd. Private Foreign Bank
The Development Bank of Singapore Private Foreign Bank
67 Ltd. (DBS Bank Ltd.)
The Hongkong & Shanghai Banking Private Foreign Bank
68 Corporation Ltd.
69 Tamilnad Mercantile Bank Ltd. Indian Private Bank
70 The Bank of Rajasthan Limited Indian Private Bank
71 The Dhanalakshmi Bank Limited. Indian Private Bank
72 The Federal Bank Ltd. Indian Private Bank
73 The HDFC Bank Ltd. Indian Private Bank
74 The Jammu & Kashmir Bank Ltd. Indian Private Bank
75 The Nainital Bank Ltd. Indian Private Bank
76 The Sangli Bank Ltd. Indian Private Bank
77 The South Indian Bank Ltd. Indian Private Bank
78 The Ratnakar Bank Ltd. Scheduled Commercial Bank
79 The Lakshmi Vilas Bank Ltd Indian Private Bank
80 UCO Bank Nationalized Bank
81 UTI Bank Ltd. Indian Private Bank
82 Union Bank of India Nationalized Bank
83 United Bank Of India Nationalized Bank
84 Vijaya Bank Indian Private Bank
85 Yes Bank Indian Private Bank
Financial Institutions
1 National Bank for Agriculture and Rural Development
2 Export-Import Bank of India
3 National Housing Bank
4 Small Industries Development Bank of India
5 Industrial Investment Bank of India Ltd.
6 North Eastern Development Finance Corporation
10.3 Currency
India’s monetary unit is the Indian Rupee (INR/Rs). Only the central government is
empowered to legislate on matters relating to currency and coinage and the RBI is the sole
authority empowered to issue currency. RBI notes are fully backed by approved security,
including bullion, foreign securities, rupee coins and rupee securities of the government. A
rupee is divided into 100 paise.
As the rupee is not freely convertible into foreign currency, foreign exchange transactions
are carried out through entities authorized by the RBI to deal in foreign exchange or
foreign securities, i.e. an authorized moneychanger or an offshore banking unit. A person
may purchase foreign exchange from an authorized dealer by providing a declaration of
the intended use of the foreign exchange. Usage of foreign exchange for purposes other
than that declared would lead to contravention of the Foreign Exchange Management Act,
1999 (FEMA).
Forex Control
The rupee is fully convertible for trade and current account purposes. Except for certain
specified restrictions where RBI approval is necessary, foreign currency may be freely
purchased for trade and current account purposes.
Capital account transactions are not permitted unless they are specifically allowed and
prescribed conditions are satisfied. Special provisions apply for repatriation of capital,
royalties and technical know-how fees, technical service fees, dividends, interest and other
remittances.
A company may issue shares under this Scheme, to its employees or employees of its
joint venture or wholly owned subsidiary abroad who are resident outside India,
directly or through a Trust subject to the condition that the scheme has been drawn in
terms of relevant regulations issued by the SEBI; and face value of the shares to be
allotted under the scheme to the non-resident employees does not exceed 5% of the
paid-up capital of the issuing company.
An Indian corporate can raise foreign currency resources abroad through the issue of
ADRs or GDRs. Regulation 4 of Schedule I of FEMA Notification No. 20 allows an Indian
company to issue its Rupee denominated shares to a person resident outside India
being a depository for the purpose of issuing GDRs and/ or ADRs, subject to the
conditions that:
• the ADRs/GDRs are issued in accordance with the Scheme for issue of Foreign
Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt
Mechanism) Scheme, 1993 and guidelines issued by the Central Government
thereunder from time to time.
• The Indian company issuing such shares has an approval from the Ministry of
Finance, Government of India to issue such ADRs and/or GDRs or is eligible to issue
ADRs/ GDRs in terms of the relevant scheme in force or notification issued by the
Ministry of Finance, and
• Is not otherwise ineligible to issue shares to persons resident outside India in terms
of these Regulations.
• All foreign investments are freely repatriable except for the cases where NRIs
choose to invest specifically under non-repatriable schemes. Dividends declared
on foreign investments can be remitted freely through an Authorised Dealer.
• Non-residents can sell shares on stock exchange without prior approval of RBI
and repatriate through a bank the sale proceeds if they hold the shares on
repatriation basis and if they have necessary NOC/tax clearance certificate
issued by Income Tax authorities.
• For sale of shares through private arrangements, Regional offices of RBI grant
permission for recognized units of foreign equity in Indian company in terms of
guidelines indicated in Regulation 10.B of Notification No. FEMA.20/ 2000 RB
dated May ‘2000. The sale price of shares on recognized units is to be 3rd
determined in accordance with the guidelines prescribed under Regulation
10B(2) of the above Notification.
In order to make the environment in India more attractive for foreign investors,
Government has decided to simplify the procedure by placing the following under
the General Permission route ( i.e. RBI route ) instead of existing Government
approval route (i.e. FIPB route) for speedy and streamlined investment approvals:
General permission has been granted to non-residents/NRIs for transfer of shares and
convertible debentures of an Indian company as under:-
• A person resident outside India ( Other than NRI and OCB) may transfer by
way of sale or gift the shares or convertible debentures to any person
resident outside India ( including NRIs); provided transferee has obtained
prior permission of SIA/FIPB to acquire the shares if he has a venture or tie-
up in India through investment in shares or convertible debentures or a
technical collaboration or a trade mark agreement or investment in the same
field in which the Indian company whose shares are being transferred, is
engaged.
• NRI or OCB may transfer by way of sale or gift the shares or convertible
debentures held by him or it to another non-resident Indian; provided
transferee has obtained prior permission of Central Government to acquire
the shares if he has a venture or tie-up in India in the same field in which the
Indian company whose shares are being transferred, is engaged.
• The person resident outside India may transfer any security to a person
resident in India by way of gift.
• A person resident outside India may sell the shares and convertible
debentures of an Indian company on a recognized Stock Exchange in India
through a registered broker.
PART 11 METHODS OF PAYMENT
A letter of credit differs from a bank guarantee. An issuing or confirming bank's obligation
is independent of, and unqualified by, the contract of sale under the transaction. A
commercial credit is neither a performance bond, nor it is a guarantee of the quantity or
quality of the goods shipped.
A contract for sale of goods between the seller and the buyer incorporates mode of
settlement. Letters of credit by their nature are separate from the sale contract, and banks
are not concerned or bound by such sale contracts even if the credits bear reference to
them.
The credits stipulate documents which have to be tendered for payment and it, therefore,
follows that in credits parties deal with documents and not with goods, services or
performances to which the documents relate.
It is, therefore, in the interest of all the parties concerned that the conditions and terms of
credit are complete and precise and bereft of excessive details.
Payment under a letter of credit does not depend on the performance obligation on the
part of the exporter except those which the credit imposes. Banks accept documents under
letters of credit for what those document purport to be on their face. Contract between the
buyer and the seller is obligatory between themselves. The seller (beneficiary) cannot take
advantage of any contractual terms in between the buyer and the opening bank and
between the opening bank and the advising/confirming bank.
11.3.1 Benificiary : The exporter of goods in whose favour the L/C has been established.
Customer/importer : The person we intends to import the goods and instructs bank to
established Letter of Credit.
11.3.2 Issuing Bank: The Banker in the importers Country who opened the L/C.
Correspondent Bank or Advising Bank: The banker in the exporters country, who is
authorised by the issuing bank to advise the beneficiary of the Credit and to effect such
payment or to accept and pay such bills of exchange or to negotiate against Stipulated
documents and on Compliance of Stipulated terms and condition specified by the importer
on the exporter.
11.3.3 Confirming Bank: The banker in the exporters(beneficiary) country, who at the
desire of the beneficiary adds confirmation to the letter of Credit so that beneficiary can
get payment without recourse from the Confirming bank. The Confirming bank may be
correspondent bank itself or some other bank.
11.4 Mode of payment
Payments in retirement of bills drawn under L/C as well as bills received from abroad for
collection against imports into India, must be received by authorised dealers, irrespective
of amount, by debit to the account of the importer with themselves or by means of a
crossed cheque drawn by him on his other bankers.
Payment for import bills-Where the import bills are drawn in Indian Rupees (INR), an
equivalent amount(plus bank charges) is debited to the account of the importer by the
authorised dealer and the amount remitted to the foreign seller. In case the bills are drawn
in foreign currencies, the INR equivalent is arrived at by applying the appropriate foreign
exchange rate.
Fixing of Re. Equivalent-In order to bring uniformity in the handling of import bills under
L/C authorised dealers have been directed by the RBI to follow the following procedure:
Sight import bills received under L/C and conforming to credit terms, may be held in
foreign currency for a maximum period of 10 days from the date of receipt of documents
by the Bank.
An importer may not like to clear or may have certain problems in clearing the imported
goods immediately on payment of duty for home consumption. In that case the importer
can deposit the goods in a Public or Private Bonded Warehouse, provided he is satisfied
with the arrangement. Thus, the importer can avail the facility of deferring payment of
duty on imported goods pending their actual clearance.
PART 12 LOCAL JURIDICIAL SYSTEM
12.2 Types of food safety and quality standards that apply in most countries
Food exporters will have to grapple with India’s varied and outdated food sector laws,
particularly those pertaining to the use of additives and colors, labeling requirements,
packaging, weights and measures, shelf-life, and phytosanitary regulations. Following the
removal of quantitative restrictions on imports of food products in 2001, the GOI issued
several notifications to make imported food products comply with domestic laws.
Some of the major food laws affecting Indian food importers are:
• The Prevention of Food Adulteration (PFA) Act, 1954, and PFA Rules of
1955, as amended. This is a basic statute established to protect consumers
against adulterated foods, and it encompasses food colors and preservatives,
pesticide residues, packaging, labeling, and regulation of sales. This is similar
to the Federal Food, Drug, and Cosmetics Act of the United States’ Food and
Drug Administration. PFA standards and regulations apply equally to domestic
and imported products. The PFA Act and Rules, and recent notifications are
available at: http://mohfw.nic.in/pfa.htm
• The Standards of Weights and Measures Act, 1976, and the Standards
of Weights and Measures (Packaged Commodities) Rules, 1977, as
amended. This Act established standards for weights and measures to regulate
interstate trade and commerce in goods that are sold or distributed by weight,
measure, or number. The Rules formed under the Act require labeling
regarding the nature of the commodity, the name and address of the
manufacturer, quantity, date of manufacture, best-before date, and the MRP.
These labeling requirements apply equally to imported and domestic packaged
foods. This Act and Rules and recent notifications are available at:
http://fcamin.nic.in/wm_ind.htm
• The Fruit Products Order, 1955 The fruit and vegetable processing sector
is regulated by the Fruit Products Order, 1955 (FPO), which is administered by
the Department of Food Processing Industries. The FPO contains specifications
and quality control requirements regarding the production and marketing of
processed fruits and vegetables, sweetened aerated water, vinegar, and
synthetic syrups. All such processing units are required to obtain a license
under the FPO, and periodic inspections are carried out. Processed fruit and
vegetable products imported into the country must meet the FPO standards.
The FPO can be accessed from: http://mofpi.nic.in/fpoact.pdf.
• Meat Food Products Order, 1992 This order administers the permissible
quantity of heavy metals, preservatives, and insecticide residues for meat
products. The Directorate of Marketing and Inspection, Ministry of Agriculture,
is the regulatory authority. This order is equally applicable to domestic
processors and importers of meat products. However, its implementation is
weak, due to unorganized production in the domestic market and few subject
imports. For details, see: http://agmarknet.nic.in/mfpo1973.htm
• Milk and Milk Products Order, 1992 This order regulates the production,
distribution, and supply of milk products; establishes sanitary requirements for
dairies, machinery, and premises; and sets quality control standards for milk
and milk products. Standards specified in the order also apply to imported
products. The Department of Animal Husbandry and Dairying, Ministry of
Agriculture, is the regulatory authority. For details see:
http://dahd.nic.in/order/mmpo.doc
• The Food Safety and Standards Bill, 2005 The GOI is in the process of
enacting an integrated food law, which is called the "Food Safety and Standards
Bill, 2005," in order to establish science-based standards for articles of food
and to regulate their manufacture, import, export, storage, distribution, and
sale. The Bill would bring all existing food-related legislation under one
umbrella, which would entail the establishment of a Food Safety and Standards
Authority of India. It is expected that the Bill will pass through Parliament by
the end of 2005 or early 2006. The full text of the Food Safety and Standards
Bill, 2005, is available at: http://mofpi.nic.in/foodsfty.htm
The Indian Parliament has recently passed the Food Safety and Standards Act, 2006
which overrides all other food related laws. When it comes into effect (date yet to be
notified) it will specifically repeal eight laws:
The Prevention of Food Adulteration Act, 1954
The Fruit Products Order, 1955
The Meat Food Products Order, 1973
The Vegetable Oil Products (Control) Order, 1947
The Edible Oils Packaging (Regulation) Order, 1998
The Solvent Extracted Oil, De oiled Meal, and Edible Flour (Control) Order, 1967
The Milk and Milk Products Order, 1992
Any other order issued under the Essential Commodities Act, 1955 relating to food.
The Act establishes a new national regulatory body, the Food Safety and Standards
Authority of India, to develop science based standards for food and to regulate and
monitor the manufacture, processing, storage, distribution, sale and import of food so as
to ensure the availability of safe and wholesome food for human consumption.
All food imports will therefore be subject to the provisions of the Act and any rules and
regulations made under the Act. As an interim measure, the standards, safety
requirements and other provisions of the repealed Acts and Orders and any rules and
regulations made under them will continue to be in force until new rules and regulations
are put in place under the Food Safety and Standards Act, 2006. For that reason,
importers will for some time have to continue to take into account the provisions of those
repealed Acts and Orders.
There are currently 194 pesticides registered in India and the Maximum Residue Limits
(MRLs) permissible in food commodities can be found in Part XIV of the Prevention of
Food Adulteration rules and at http://www.mohfw.nic.in/7.pdf
For imported foodstuffs when the pesticides are not included in the Indian list, zero
tolerance applies. However, FVG exporters are advised to check with Indian importers
regularly. The regulation of pesticides and other contaminants may need further
clarification upon implementation of the Food Safety and Standards Act, 2006, since the
Act specifically excludes plants prior to harvesting and animal feed from its purview.
The Food Safety and Standards Act, 2006 requires that health claims or guarantees of
efficacy of a food have to be based on an adequate or scientific justification. Such
justification may include clinical trials, protocols or scientific studies and must be able to
withstand verification in court if challenged. Manufactured and imported food claiming to
be enriched with nutrients, such as minerals, proteins or vitamins, should indicate
quantities on the label.
The Food Safety and Standards Act, 2006 prohibits the manufacture, distribution, sale or
import of any genetically modified (GM) food, unless specifically allowed under the Act or
regulations made thereunder. However, until such specific regulations are made, the
Genetic Engineering Approval Committee (GEAC), under the Department of Environment,
Forests and Wildlife, remains the decision-making authority on GM food issues, including
their import. Therefore, at present, food ingredients and additives containing
bioengineered organisms may only be produced, used or imported with the approval of
the GEAC, such approval being granted for up to four years in the first instance, and
thereafter renewable for 2 years at a time. New rules implemented in July 2006 under the
Foreign Trade (Development and Regulation) Act, 1992 require all GM products, including
GM foods, food additives, or any food product that contains GM material, to carry a
declaration stating that the product is genetically modified. In case a consignment does
not carry such a declaration and is later found to contain GM material, the importer is
liable for penal action under the Act.
The Indian judiciary is relatively independent and the legal system is based on English
common law. India’s independent judicial system began under the British, and its concepts
and procedures resemble those of Anglo Saxon countries.
India has a three tier court system. At the apex is the Supreme Court, which has original,
appellate and advisory jurisdiction and proceedings arise out of judgments of sub-ordinate
courts including the High Courts.
The Supreme Court consists of a chief justice and 25 other justices, all appointed by the
President of India on the advice of the Prime Minister. The High Court stands at the head of
the state’s judicial administration. Each state is divided into judicial districts presided over
by a district and sessions judge, who is the highest judicial authority in a district. Below
him, there are courts of civil jurisdiction known in different states as musifs, sub-judges,
civil judges and the like. Similarly, the criminal judiciary comprises chief judicial
magistrates and judicial magistrates, first and second class.
The Supreme Court has exclusive original jurisdiction that extends to all disputes between
the Union and one or more states or between two or more states. The Constitution gives
original jurisdiction to the Supreme Court to enforce Fundamental Rights. Appellate
jurisdiction of the Supreme Court can be invoked by a certificate of the High Court
concerned or by special leave granted by the Supreme Court in respect of any judgment,
decree or final order of a High Court in cases both civil and criminal, involving substantial
questions of law as to the interpretation of the Constitution. The President may consult the
Supreme Court on any question of fact or law of public importance.
High Courts
There are 18 High Courts in the country, three having jurisdiction over more than one
state. Bombay High Court has jurisdiction over Maharashtra, Goa, Dadra and Nagar Haveli
and Daman and Diu. Guwahati High Court, which was earlier known as Assam High Court
has jurisdiction over Assam, Manipur, Meghalaya, Nagaland, Tripura, Mizoram and
Arunachal Pradesh. Punjab and Haryana High Court has jurisdiction over Punjab, Haryana
and Chandigarh. Among the Union Territories, Delhi alone has a High Court of its own.
The Chief Justice of a High Court is appointed by the President in consultation with the
Chief Justice of India and the Governor of the State. Each High Court has powers of
superintendence over all courts within its jurisdiction. Certain High Courts, like those at
Bombay, Calcutta and Madras have original and appellate jurisdictions, while most High
Courts have only appellate jurisdiction.
There is an Advocate General for each state. At the local level, there are district courts
which deal with local issues. The right to fair trial and recognition as a person before the
law constitutes a low-risk human rights area in India since the Indian legal system
complies with international standards and the rights of a person are respected.
The Indian Legal Hierarchy is somewhat of the following nature:
• In the Metropolitan Cities on the Civil Side, the first are the Small Cases Courts and
above them the City Civil Courts. On the Criminal Side there are the Metropolitan
Magistrates' Courts and above them the Sessions Courts.
• In the Moffusil on the Civil Side, there are the Courts of the Civil Judge, Junior
Division, Civil Judge Senior Division, and District Courts. On the Criminal Side there
are the Courts of the Judicial Magistrates and Sessions Courts. Then there are the
Industrial Courts, Family Courts, Co-operative Courts and various Tribunals.
• In the Corporate Sector, there is a Company Law Board constituted by the Central
Government under the Provisions of Section 10E of the Companies Act, 1956 which
has its Principal Bench in New Delhi and Regional Benches of Single as well as
Double Members at New Delhi, Kolkata, Mumbai and Chennai.
• Above all the aforesaid Lower Level Courts, Tribunals and Boards, there are High
Courts in each of the States, and above the High Courts is the Supreme Court of
India in New Delhi.
• India has a written Constitution and codified Central and State law. Its Judiciary is of
the highest integrity. The official language is English in the High Courts and in the
Supreme Court. The Indian Legislature and Judiciary make constant efforts to bring
about improvements in Courts and dispense justice speedily. On the
recommendations of the General Assembly of the United Nations to consolidate and
amend the law relating to domestic arbitration, international arbitration and
enforcement of the foreign arbitral awards a new Arbitration and Conciliation Act has
been enacted. To expedite the disposals of cases concerning the transactions related
to Banks a special tribunal is being established. To facilitate foreign investment,
foreign joint venture and globalization of Indian Trade & Industry, various
amendments have been thought of in the existing Companies Act, 1956 and a
proposal of enacting a new Take-over Code is under consideration. The Income-Tax
Act, 1961, which at present is lengthy and complicated, is thought of being revised
and in its place a simple Tax Law is proposed to be enacted. In short there is a
general tendency towards improvement in laws and Courts.
PART 13 NAMES OF EVENTUAL PARTNERS
1. Mr. K. P. Ramachandran
Purchase Manager
Food World
4th Floor, Spencer Plaza
769 Anna Salai, Chennai - 600 002
(Supermarkets)
2. Mr. C. Gopalkrishnan
Director
Nilgiri Dairy Farm Ltd
171 Brigade Road
Bangalore-560 001
(Supermarkets)
Phone: 91-80-5588401/702, 552 7124
Fax: 91-80-5585348, 552 7125
Email:nilgirisnest@vsnl.net
4. Mr S. Chandrasekhar
Purchase Manager
Subhiksha Trading Services (P) Ltd
37-F, Velachery - Tambaram Road
Vijay Nagar, Velachery
Chennai - 600 042
Phone: 91-44-2243 4518/9
Fax: 91-44-2243 4518/9
Mr Paras Bhatia
K. T. Bond Stores
Abhay Steel House, Basement No.1,
Baroda Street, Dana Bunder, Masjid (E)
Mumbai 400 009.
(Bonded Stores)
Phone: 91-22-2374 6555
Fax: 91-22-2374 4989
Email: ktbs@bol.net.in
Mr. B. Bhomisha
H. B. Irani (Bond)
579 Inside M. J. Phule Market
Mumbai-400 001
(Bonded Stores)
Phone: 91-22-2340 1609
Fax: 91-22-2342 7963
Email: hbirani@vsnl.com
Mr. K. S. Mudder
Chief Executive
Precision Enterprises
C-8/8177 Vasant Kunj
New Delhi-110 070
(Bonded stores)
Phone: 91-11-2613 2434, 2612 5424
Fax: 91-11-2613 2375
Email: ksmudder@del2.vsnl.net.in
Mr.Anish Bindra
Director
S.N.Sahni & Company
C-56, New Azadpur Subzi Mandi
New Delhi - 110 033
(Bonded stores)
Phone: 91-11-2742 8020
Fax: 91-11-2741 2360
E-mail: abindra@vsnl.com
Mr. R. C. Gupta
Vice President
Ashok International Trade Division
ITDC
Scope Complex, 7 Lodi Road
New Delhi - 110 003
Phone: 91-11-2436 1772/0303
Fax: 91-11-2436 4856
Email: itdcavp@vsnl.net
M/s J.P. Engineers
c/o Global Shipping Services (Mr.P. Sreedhar)
194 Tambu Chetty Street,
Chennai-600 020
(Bonded stores)
Phone: 91-44-2524 2389, 2523 0853
Fax:91-44-2524 2389
Mr R. K. Parsan
Paras Brothers
18-B, Sukea Lane
Calcutta 700 001
(Bonded stores)
Phone: 91-33-242 3870/4657
Cellphone: 98310 63489
Fax: 91-33-242 8621
Email: parsan@cal3.vsnl.net.in
Dipak K. Mookerjee
Director
K.T. Bond Pvt. Ltd.
1, Satya Doctor Road
Khidderpore, Kolkatta - 700 023
(Bonded stores)
Tel: 91-33-459 4659
Fax: 91-33-459 5244
E-mail: mmcl@cal2.vsnl.net.in
Luxury Hotels
Mr. Girish Shenai
Materials Manager
Oberoi Hotels
Nariman Point
Mumbai - 400 021
Phone : 91- 22- 2282 9632, 2232 6130, 2232 5757
Fax : 91-22-2284 3366/2204 3282
Email: girish@oberoi-mumbai.com
Mr. Yogender Singh Guleria
Materials Manager
The Taj Mahal Hotel
Apollo Bunder
Mumbai - 400 001
Phone : 91-22-2202 3366
Fax : 91-22-2283 7647
Email: tmhpurch.bom@tajhotels.com
Mr.N.K. Kapoor
Corporate Director (Materials)
E I H Ltd.
7 Sham Nath Marg
Delhi-110 054
Phone: 91-11-2389 0505
Fax: 91-11-2389 0549
Email: nkkapoor@eih-india.com
Mr.A.K. Tiwari
Director (Purchase)
Hotel Intercontinental
Barakhamba Avenue, Connaught Place
New Delhi - 110 001
Phone: 91-11-2341 1001
Fax: 91-11-2370 9123
Email: newdelhi@interconti.com
Vinay Gidwani
D.V.IMPORTS - I.F.C. INTERNATIONAL
PHONE# 91-9811009377
vinaygidwani@gmail.com
Table below represents risk assessments of selected aspects of the Indian economy. Of
particular interest to Canadian exporters is the "Foreign Trade and Payments" risk score of
54 out of 100, where 100 is the highest level of risk.
Risk Score
Overall assessment. 54
Political stability. 40
Legal & regulatory. 60
Macroeconomic. 25
Foreign trade & payments. 54
Source: Economist Intelligence Unit, View Wire. Note: 100 = Most risky.
Increasing economic disparities among regions are emerging as a political risk capable of
provoking serious socio-political tensions that could lead to localized violence from time to
time. The states likely to be advancing economically are: Gujarat, Haryana, Kerala,
Maharashtra, Punjab and Tamil Nadu. Those likely to be lagging economically are: Assam,
Bihar, Madhya Pradesh, Orissa, Rajasthan and Uttar Pradesh.
Although this is essentially an internal situation it can, at times, interrupt the flow of
imports and negatively affect the solvency of Indian importers.
India has major disputes with Pakistan and China. India disputes Pakistan's claim to
Kashmir and questions its claim to have stopped sponsoring terrorism in Kashmir.
Relations with China are strained by its claim to Arunachal Pradesh and a portion of land
adjacent to Jammu and Kashmir.
Any outbreak of hostilities between India and its neighbours could disrupt trade and
negatively affect the solvency of some importers.
India could benefit greatly from free trade. However, there are wide gaps in the positions
of major world traders on some important issues. If the talks should collapse with no
progress, the concept of free trade will be in jeopardy and the gains India may make will
be at risk. On the other hand the possibility of failure may spur participants to make
major concessions and increase the convergence of positions.
Some risks are normally covered by commercial cargo insurance in accordance with
minimum cover of the Institute Cargo Clauses (Institute of London Underwriters) or some
similar clause. This insurance normally covers the standard risks involved in transporting
goods, such as accidents and weather.
Most large banks have international departments that are able to provide guidelines for
importers and exporters to help manage risk.
Dealing with buyers in other countries adds a layer of complexity to trading. It’s wise to
be aware of potential risks and fraud, and to understand the strategies that can help you
protect your business against them.
Currency risk is the local currency amount receivable on settlement will be lower than the
amount calculated when entering the contract, due to an adverse movement in the
market price of the currency.
The buyer will repudiate the contract and refuse to pay. Any efforts you make to enforce
the contract will add costs that detract from your expected profit.
A change in government regulations will prevent or restrict your ability to ship goods.
As an exporter, you initiate this method of payment, which requires your buyer to make
immediate or deferred payment. Your shipping documents are released to the buyer
against payment or a promise to pay at a future date.
International acceptance
Issued at sight or term
Control over shipping documents until payment is made or promised
You lodge the completed bill of exchange, relevant shipping documents and a lodgment
authority with your bank. The bank forwards the collection to your buyer’s bank, and the
buyer is advised upon receipt. Banks are involved because they act as trusted third
parties to ensure the supplier can exercise some control over the goods until such time as
either payment is made or a promise to pay at a certain future date is provided.
You retain control over shipping documents until payment or a promise to pay is received.
For approved clients, proceeds may be advanced prior to receipt of payment from the
overseas bank, improving your cash flow position.
The payment is made at sight, when you present documents that meet all the terms
conditions, or at term, a date in the future that is specified in the Documentary Credit.
Features
14.4 Value and Volume of Retail Sales of Packaged Food, Sector by Region.
(India. 2003 and 2004.)
Sector Item East and North South West
Northeast
Confectionery. Sales (Billion 4.61 5.0 7.25 7.79 8.01 8.49 6.99 7.46
INR). 1
Volume ('000 24.11 25.9 34.44 36.92 40.34 42.57 32.95 34.78
Tonnes). 7
Bakery. Sales (Billion 19.63 21.2 39.48 41.98 22.64 24.54 31.19 33.43
INR). 2
Volume ('000 420.3 441.2 776.94 824.8 479.04 509.04 622.4 649.1
Tonnes). 8 4
Ice Cream. Sales (Billion 0.94 1.0 2.23 2.55 1.42 1.62 2.3 2.6
INR). 9
Volume ('000 8,323 9,39 16,907 18,61 12,05 13,502 18,45 20,25
Litres). 6 8 3 3 6
Dairy Products. Sales (Billion 12.46 13.55 22.54 24.14 24.51 26.18 31.95 34.05
INR).
Volume ('000 n/a n/a n/a n/a n/a n/a n/a n/a
Tonnes).
Sweet Sales (Billion 1.33 1.52 2.26 2.54 1.2 1.35 2.3 2.54
and INR).
Savoury
Volume ('000 7.68 8.62 16.03 17.6 6.02 6.62 16.04 17.49
Tonnes).
Meal Sales (Million 1,102 1,157 960.00 960.3 1,125 1,198 845.0 908.3
Replacemen INR). 6 0 8
t Products.
Volume ('000 4.25 4.35 3.72 3.83 4.47 4.6 3.32 3.47
Tonnes).
Ready Meals. Sales (Million 71.29 118.55 191.11 269.9 157.67 252.48 222.9 319.3
INR). 5
Volume ('000 0.55 0.9 1.27 1.73 0.88 1.4 1.83 2.58
Tonnes).
Soup. Sales (Million 49.38 54.15 147.02 165.5 101.82 113.7 148 162.5
INR).
Volume ('000 0.16 0.17 0.47 0.51 0.35 0.38 0.48 0.51
Tonnes).
Pasta. Sales (Million 12.19 13.65 17.46 19.9 14.64 17.28 25.49 29.57
INR).
Volume ('000 0.11 0.12 0.19 0.22 0.17 0.2 0.24 0.27
Tonnes).
Noodles. Sales (Million 756.3 965.64 1,149 1,418 951.3 1211 1189 1387
INR). 7 5
Volume ('000 7.76 9.88 11.72 14.56 10.3 12.91 11.77 13.95
Tonnes).
Canned/ Sales (Million 396.8 463.35 568.17 657.2 414.89 509.84 568.4 677.1
Preserved INR). 2 3
.
Volume ('000 4.79 5.36 6.15 6.76 4.18 4.78 6.29 7.19
Tonnes).
Frozen Sales (Million 373.1 412.27 1295 1480 883.64 999.36 1.395 1580
Processed. INR). 5
Volume ('000 2.4 2.59 7.04 7.89 5.09 5.66 7.66 8.47
Tonnes).
Dried Sales (Billion 2.9 3.34 4.02 4.59 3.4 3.95 3.79 4.3
Processed. INR).
Volume ('000 173.9 180.47 356.13 369.2 288.36 298.77 391 401.4
Tonnes). 4
Sauces, Sales (Billion 2.68 2.96 3.92 4.35 3.97 4.37 3.34 3.64
Dressings INR).
and
Volume ('000 21.04 22.89 22.27 24.55 33.13 36.32 22.57 24.44
Tonnes).
Baby Food. Sales (Million 1150 1199 575.43 600.1 858.26 890.97 673.2 711
INR). 2
Volume ('000 5.66 5.88 2.63 2.75 4.08 4.26 3.13 3.29
Tonnes).
Spreads. Sales (Million 361.4 375.42 598.15 623.2 299.99 310.12 870.8 918
INR). 9 8
Volume ('000 2.96 3.05 4.66 4.77 2.72 2.8 6.48 6.78
Tonnes).
Source: Euromonitor, "Packaged Food in India (January 2005)."
Economic Overview
India’s economic growth slowed slightly in the second quarter of 2006 to 8.9% year-over-
year from 9.3% in the first quarter, but remained the second fastest growing economy
among the world’s twenty largest economies.
• Hotel, trade, transport and communication, the largest component of GDP, rose
13.2% following a 12.9% rise.
• The second largest component, agriculture, slowed a bit to 3.4% from 5.5%, which
was the fastest growth in two years.
• Manufacturing rose 11.3%, construction rose 9.5%, utilities rose 5.4%, and
financial services rose 8.9%.
• The construction industry is booming as the government invests in infrastructure
improvement and expansion. This, along with a good monsoon season, which has
boosted incomes for farmers, is leading to record demand for financial services and
loans. Although wholesale inflation has slowed from 5.5% in June to 4.56% for the
week ended September 16, it remains above the government’s 4% target.
• Strong economic growth, record credit growth, high oil and commodity prices and
stout consumer spending have led to a 150 basis point increase in the central bank’s
key reverse repo rate to 6.0% since October 2004. The rate increases in June and
July have helped the rupee to rebound from the plunge in the May-July period amid
the global exodus from emerging markets. The rupee has rebounded to Rs45.01:
US$1 on November 17 from RS46.95: US$1 on July 19.
• The weaker rupee has supported exports recently, but has not deterred imports,
keeping the trade deficit virtually unchanged since April at around $3.9 billion.
Imports, which rose 24.2% in July from a year ago, remain elevated as rising
incomes spur domestic demand, while factories continue to suck in raw materials for
manufacturing goods. In addition, the government’s spending on infrastructure has
increased imports of steel and cement. Exports, which rose 34.8% in July, remain
strong amid robust global demand for gems, textiles and other manufactured
products. All of this has fuelled a surge in industrial production, which rose 12.4% in
July from a year ago, the fastest growth since June 1996. Another spate of emerging
market jitters, which could weaken the rupee, and high oil and commodity prices
could keep inflation elevated and lead to further interest rate hikes, which could slow
the economy.
• On the political front, recent polls suggest that if an election were held before the
planned election in May 2009, it may be possible for the UPA, the current ruling
party, to gain a majority over the opposition BJP without the need for support from
the Left Front. This would allow the UPA to enact much needed reforms that the Left
Front opposes, such as liberalizing labor regulations, raising foreign investment
ceilings and privatizing state-owned enterprises. In addition, it would allow the UPA
to decrease the welfare spending that is so vigorously demanded by the Left Front,
which has prevented India from reducing its vast public debt. The risk of going to
the polls early and having an unfavorable outcome suggests that the chance of an
early election is minimal. However, the risk of political upheaval must not be
overlooked.
Government Intervention
The World Bank reports that the government consumed 12.8 percent of GDP in 2003. In
the same year, according to the International Monetary Fund's Government Financial
Statistics CD–ROM, India received 17.9 percent of its total revenues from state-owned
enterprises and government ownership of property.
Monetary Policy
From 1995 to 2004, India's weighted average annual rate of inflation was 3.85 percent.
Foreign Investment
According to the U.S. Department of Commerce, "India controls foreign investment with
limits on equity and voting rights, mandatory government approvals, and capital controls."
The Economist Intelligence Unit characterizes India as "a difficult market for foreign
companies. Most economic activities are bound by restrictions, public services and
infrastructure are poor, and the government continues to impede the free flow of capital
across its borders." However, India is taking gradual steps to attract more foreign
investment, and foreign ownership is permitted in most sectors. The U.S. Department of
Commerce reports that in January 2005, "the GOI [Government of India] relaxed
restrictions on new [foreign direct investment] in India by foreign partners of joint
ventures. The previous rules, issued in Press Note 18 in 1998, had required a release by
the Indian partner and GOI approval for any new investment, a provision often subject to
abuse. The new rules maintain restrictions on the majority of existing joint ventures, but
leave new ones to negotiate their own terms on a commercial basis." Sectors off-limits to
foreign investment include agriculture, legal services, railways, real estate, retailing, and
security services. The International Monetary Fund reports that central bank approval is
required for residents to open foreign currency accounts, either domestically or abroad,
and that such accounts are subject to significant restrictions. Non-residents may hold
foreign exchange and domestic currency accounts, subject to approval and conditions.
Some payments and transfers face quantitative limits. The IMF reports that capital
transactions and some credit operations are subject to certain restrictions and
requirements.
The government continues to influence prices on several goods and services. The
Economist Intelligence Unit reports that the Essential Commodities Act of 1955 applies
price controls at the factory, wholesale, and retail levels on "essential" commodities.
Electricity, some petroleum products, and certain types of coal are the only items with fully
administered prices. The government also controls the prices of pharmaceuticals. The
government mandates minimum wages that vary by state and industry.
Regulation
Businesses must contend with extensive federal and state regulation. According to the U.S.
Department of Commerce, "firms have identified corruption as one obstacle to
investment. Indian businessmen agree that red tape and wide-ranging administrative
discretion serve as a pretext to extort money." In addition, labor laws are rigid. The
Economist reports that "any company employing more than 100 people requires the
permission of the state authorities to sack workers…."
Informal Market
Transparency International's 2004 score for India is 2.8. Therefore, India's informal market
score is 4 this year.
Indian government’s deficit which declined to 7.5% in 2005/06 from 10.1% of GDP in fiscal
year 2001/02, helped the currency ratings improve. Higher growth and lower interest rates
have played a part in this outcome but so, too, have much improved tax administration
and some widening of the tax net. Modest tightening at the centre has been matched by
parallel progress among India’s 25 states and union territories, many of which have
introduced value-added tax and enacted fiscal responsibility legislation over the past year.
India’s established track record of macroeconomic stability, low inflation and a high
domestic savings rate, coupled with a deep domestic capital market and external capital
controls, reduces the country’s currency risk.
The table given below gives overall risk rating for India as of May 2006.
The Council also provides arbitration services for settlement of maritime disputes arising
out of charter party contracts and it has framed maritime arbitration rules for such
disputes. The Ministry of Surface Transport, Government of India has recommended the
use of the ICA arbitration clause in the charter party contracts so that dispute, if any, can
be settled under the ICA maritime arbitration rules.
Parties involved in export-import trade with Indian counterparts can also seek dispute
resolution by seeking the services of another organization namely International Centre for
Alternative Dispute Resolution (ICADR). This organization has been established as an
autonomous organization under the aegis of Ministry of Law, Justice and Company Affairs
to promote settlement of domestic and international disputes by different modes of
alternate dispute resolution. ICADR has its headquarters in New Delhi and has regional
office in Lucknow and Hyderabad. More information on ICADR can be obtained from the
website: http://www.icadr.org/
15.1 Introduction
1. The Patents (Amendment) Act, 1999 passed by the Indian Parliament on March 10,
1999 to amend the Patents Act of 1970 that provides for establishment of a mail box
system to file patents and accords exclusive marketing rights for 5 years.
2. The Trade Marks Bill, 1999 which repeals and replaces the Trade and Merchandise
Marks Act, 1958 passed by the Indian Parliament in the Winter Session that concluded
on December 23, 1999.
3. The Copyright (Amendment) Act, 1999 passed by both houses of the Indian
Parliament, and signed by the President of India on December 30, 1999.
4. A sui generis legislation for the protection of geographical indications called the
Geographical Indications of Goods (Registration & Protection) Bill, 1999 approved by
both houses of the Indian Parliament on December 23, 1999.
5. The Industrial Designs Bill, 1999 which replaces the Designs Act, 1911 was passed in
the Upper House of the Indian Parliament in the Winter Session which concluded on
December 23, 1999 and is presently before the Lower House for its consideration.
6. The Patents (Second Amendment) Bill, 1999 to further amend the Patents Act, 1970
and make it TRIPS compliant was introduced in the Upper House of Indian Parliament
on December 20, 1999.
In addition to the above legislative changes, the Government of India has taken several
measures to streamline and strengthen the intellectual property administration
system in the country. Projects relating to the modernization of patent information
services and trademarks registry have been implemented with help from WIPO/UNDP. The
Government of India is implementing a project for modernization of patent offices at a
cost of Rs.756 million incorporating several components such as human resource
development, recruiting additional examiners, infrastructure support and strengthening by
way of computerization and re-engineering work practices, and elimination of backlog of
patent applications. An amendment to the Patent Rules was notified on June 2, 1999 to
simplify the procedural aspects.
The Trade Marks Registry is also proposed to be further strengthened and modernized. A
project for modernization was earlier implemented during 1993-96. Further strengthening
of the Registry is being taken up at a cost of Rs.86 million. The main thrust now is to
strengthen the infrastructure of the Trade Marks Registry and the early removal of backlog
of pending applications, transfer of records to CD-ROM’s, re-engineering of work
processes, appointment of additional examiners, etc.
As regards the aspect enforcement, Indian enforcement agencies are now working very
effectively and there has been a notable decline in the levels of piracy in India. In
addition to intensifying raids against copyright infringers, the Government has taken a
number of measures to strengthen the enforcement of copyright law. Special cells for
copyright enforcement have been set up in 23 States and Union Territories. In addition,
for collective administration of copyright, copyright societies have been set up for different
classes of works.
It has been alleged that there is absence of effective patent protection in the
pharmaceutical sector. India does provide for patents in the pharmaceutical sector.
However, in terms of Section 5 of the Patents Act, the patents are presently restricted to
the methods or process of manufacture and not extended to the substances/products
themselves. In terms of the TRIPS Agreement, India has time till January 1, 2005 to
extend patent protection to this area. The ten year transition period available for
providing product patents to pharmaceutical products is within WTO rules.
It has been further alleged that India has failed to meet its current obligations required
under Articles 70.8 and 70.9 of the TRIPS Agreement by implementing appropriate,
conforming mailbox and exclusive marketing rights procedures. However, the Government
of India has taken the following steps to meet its obligations under Articles 70.8 and 70.9:
3. India has also made changes to its Patents Act to put in place a machinery for
implementation of Articles 70.8 and 70.9 by providing for establishment of a mail box
system to file patents and according exclusive marketing rights for 5 years. This
provision was made in the Patents (Amendment) Act of 1999.
Concern has also been expressed over the compulsory licensing provision in the Patents
(Amendment) Act, 1999. It may be noted that as per the provisions of Section 84 of
Patents Act, 1970 and Clause 35 of Patents (Second Amendment) Bill, 1999, a
compulsory license may be granted in case the patented invention has not met the
reasonable requirement of the public at a reasonable price. This provision is intended to
provide for necessary and adequate safeguard for the protection of public interest taking
in to account the specific needs of a developing country like India.
Furthermore, the compulsory licensing system has been in place since the inception of the
Patents Act, 1970 in India. It is noteworthy that not a single case of misuse of this
provision has been observed during the last 30 years. An application for compulsory
license may be granted only after the applicant has approached the patentee prior to the
application with an offer to grant license on reasonable terms and conditions (as per
Clause 36 of Patents (Second Amendment) Bill, 1999). In determining whether or not to
grant a compulsory license, the Controller of Patents is required to take in to account, the
nature of the invention, the time that has elapsed since the sealing of the patent and the
measures already taken by the patentee or any licensee to make full use of the invention
(Section 85 of Patents Act, 1970). In settling terms of a compulsory license, the Controller
of Patents is required to secure that the articles manufactured under the patent shall be
available to the public at the lowest prices consistent with the patentees deriving a
reasonable advantage from their patent rights (Section 97(1)(ii)). These provisions
substantiate the extant of a non-discriminatory administration of compulsory licenses.
In addition, the Patents (Second Amendment) Bill, 1999 has provided for an appeals
process, before an Appellate Board, on any decisions by the Controller of Patents including
a grant of compulsory license (Clause 54) before approaching the Indian Courts. The
Patents Law provides for compulsory license to avoid misuse of an Exclusive Marketing
Right by the right holder. This provision meets a larger public interest, keeping in mind
the specific Indian conditions and are in compliance with Article 31 of TRIPS.
The Indian Patent laws are neutral in their application to domestic or foreign inventions.
Any disqualification, compulsory licensing, and exclusion from patentability, are provided
for only in the larger interest to provide therein necessary and adequate safeguards for
the protection of public interest, national security, bio-diversity, traditional knowledge,
etc. These provisions are within the sphere allowed under Article 27, 30 and 31 of TRIPS.
It is to be noted that 1999 has been a year of great coherence of political will, resulting in
the passage of major IPR laws and work toward the establishment of an effective
administration mechanism.
India has one of the most modern copyright protection laws in the world. Major
development in the area of copyright during 1999 was the amendment to the Copyright
Act of 1957 to make it fully compatible with the provisions of the TRIPS Agreement.
Called the Copyright (Amendment) Act, 1999, this amendment was signed by the
President of India on December 30, 1999 and came into force on January 15, 2000.
The earlier 1994 amendment to the Copyright Act of 1957 had provided protection to all
original literary, dramatic, musical and artistic works, cinematography, films and sound
recordings. It also brought sectors such as satellite broadcasting, computer software and
digital technology under Indian copyright protection.
The Copyright Act is now in full conformity with the TRIPS obligations.
The other important development during 1999 was the issuance of the International
Copyright Order, 1999 extending the provisions of the Copyright Act to nationals of all
World Trade Organization (WTO) Member countries.
Concern has been expressed about the allegedly slow judicial system in India and the
procedural issues involved in trial and conviction. The Indian judiciary is handling cases
as expeditiously as possible. The year that has gone by has again witnessed the versatility
of the impartial and independent Indian judiciary when it comes to the issue of protection
of intellectual property rights, amplified by the encouraging trends with Indian courts
plugging in gaps in the statute with the common sense of the common law.
The Copyright Act, 1957 prescribes mandatory punishment for piracy of copyrighted
matter commensurate with the gravity of the offense with an effect to deter infringement,
in compliance with the TRIPS Agreement. Section 63 of the Copyright Act, 1957 provides
that an offense of infringement of copyright or other rights conferred by the Act shall be
punishable with imprisonment for a term which shall not be less than six months but
which may extend to three years with fine which shall not be less than fifty thousand
rupees but which may extend to two lakh rupees (Rs. 200,000).
Section 63A provides for enhanced penalty on second or subsequent convictions, i.e.
imprisonment for a term which shall not be less than one year but which may extend to
three years and with fine which shall not be less than one lakh rupees (Rs. 100,000) and
which may extend up to two lakh rupees (Rs. 200,000). Section 63B provides that any
person who knowingly makes use on a computer an infringing copy of a computer
program shall be punishable with imprisonment for a term which shall not be less than
seven days but which may extend to three years and with fine which shall not be less
than fifty thousand rupees but which may extend to two lakh rupees (Rs. 200,000).
For India where the per capita income at current prices is Rs.14,682/- or US $349, the
quantum of the fines, which works out to be 14 times the per capita income, is quite a
burden on an individual and would act as a strong deterrent.
As regards the reported requirement that actual knowledge be proved in criminal cases,
the expressions “knowingly infringes or abets infringement” in Section 63 and “knowingly
makes use” in Section 63B are included to protect bona fide users. It may be noted that
the expression “knowingly” was there even in the analogous Section 7 of the Indian
Copyright Act, 1914. Bringing the principle of “ignoratia juris reminem excusat” may not
be appropriate in the case of copyright as there are quite a large number of works which
are in the public domain that a person can use freely, and it is natural for many to
presume that such works are outside the copyright regime. Copyright is a special right
created by law to protect certain rights of authors while keeping a balance of the interest
of the society. It will be too much to expect an ordinary user to sit in judgment like a
court of law as to every single aspect of the right which may or may not be applicable to a
work before using the same.
So far as Article 41 and 61 of the TRIPS Agreement are concerned, India has a modern
and efficient judicial system that fits in with the general obligations provided in Article 41.
Article 61 of the TRIP Agreement provides that remedies available shall include
imprisonment or monetary fines sufficient to provide a deterrent consistent with the level
of penalties applied for a crime of corresponding gravity. The Indian Copyright Act,
provides for both imprisonment and fine which in the Indian context would be a sufficient
deterrent.
Civil proceedings against piracy have been quite effective - a result unique in the global
enforcement against copyright piracy. For instance, in 1999, the Motion Pictures
Association (MPA), filed 3 civil actions against 3 Indian cable networks and obtained
injunctive relief covering 45 cities and 8 million cable homes. MPA has estimated that by
these injunctions alone, cable piracy has been brought down by 50%.
Further, provisional measures, such as injunctions and ‘Anton Piller’ orders, are available
through the Indian courts to stop infringement and to contain any damages. Both foreign
and domestic IPR holders are treated equally under Indian law.
Indian enforcement agencies are working effectively and there is a decline in the levels of
piracy in India. In addition to intensifying raids against copyright infringers, the
Government has taken a number of measures to strengthen the enforcement of copyright
law. A summary of these measures is given below:
1. During the year the government continued to stress the need for strict enforcement
of the Copyright Act and Rules. State governments and other Ministries were
regularly requested to lay special attention to ensuring copyright protection in their
functioning. Instructions were issued to officers in the government requesting them to
ensure copyright protection, particularly of software, in their work situation.
2. The Government also brought out A Handbook of Copyright Law to create awareness
about copyright amongst the stakeholders, enforcement agencies, professional users
like the scientific and academic communities and members of the public. Copies of
the Handbook were circulated free of cost to the state and central government officials
and police personnel and also provided to participants in various seminars and
workshops on IPR matters held during the year.
3. National Police Academy, Hyderabad and National Academy of Customs, Excise and
Narcotics conducted several training programs on copyright for the police and customs
officers. Modules on copyright have been included in their regular training programs.
5. The CEAC is reconstituted from time to time to review periodically the progress of
enforcement of the Copyright Act and to advise the government on measures for
improving the enforcement. Additional Secretary, Department of Education is the
chairman of the CEAC. The CEAC members include representatives of copyright
industry organizations and chiefs of state police forces. The CEAC meets at least twice
every year. It discusses in detail issues of enforcement, piracy, etc.
6. Special cells for copyright enforcement have so far been set up in 23 States and
Union Territories, i.e. Andhra Pradesh, Assam, Andaman & Nicobar Islands,
Chandigarh, Dadra & Nagar Haveli, Daman & Diu, Delhi, Goa, Gujarat, Haryana,
Himachal Pradesh, Jammu & Kashmir, Karnataka, Kerala, Madhya Pradesh, Meghalaya,
Orissa, Pondicherry, Punjab, Sikkim, Tamil Nadu, Tripura and West Bengal. States
have also been advised to designate a nodal officer for copyright enforcement to
facilitate easy interaction by copyright industry organizations and copyright owners.
7. For collective administration of copyright, copyright societies have been set up for
different classes of works. At present there are three registered copyright societies.
These are the Society for Copyright Regulations of Indian Producers of Films &
Television (SCRIPT) for cinematography films, Indian Performing Rights Society
Limited (IPRS) for musical works and Phonographic Performance Limited (PPL) for
sound recordings. These societies, particularly the PPL and the IPRS, have been quite
active in anti-piracy work. The PPL has even set up a special anti-piracy cell under a
retired Director General of Police, and this cell has been working in tandem with the
police.
Consequent to the number of measures initiated by the government, there has been
more activity in the enforcement of copyright laws in the country during the last year
compared to previous years. As per the data relating to copyright offenses available
with the National Crime Records Bureau, the number of copyright cases registered has
gone up from 479 in 1997 to 802 in 1998. The number of persons arrested has
increased from 794 in 1997 to 980 in 1998. The value of seizures has gone up from
Rs.2.88 crore (28.8 million) in 1997 to Rs.7.48 crore (74.8 million) in 1998. These
figures reflect the general improvement in the enforcement of the copyright law.
The source of above information is “Embassy of India- Policy Statements”
http://www.indianembassy.org/policy/ipr/ipr_2000.htm
PART 16 RULES ON LABELLING AND PACKAGING
16.1 Introduction
Packing needs to be strong to protect against extreme heat and humidity in the summer
and possible storage in the open. Steel strapping is also recommended because of the
threat of pilfering. Outer containers must bear the consignee’s mark and port mark and
they should also be numbered (in accordance with the packing list) unless their contents
can be otherwise readily identified. Gross weight must also be shown on two faces. Goods
produced in more than one country are required to have ‘Foreign Made’ or similar wording
clearly marked on the goods, their labels or packages. All other imports must show the
country of origin. Materials such as polyvinyl chloride (PVC) are not allowed for packaging
in most cities due to environmental concerns and waste disposal problems.
Strict labelling rules have been introduced by the Indian Government to protect the rights
of consumers. The Food Safety and Standards Act, 2006 prohibits the manufacture,
distribution or sale of any packaged food product which is not marked and labelled in the
manner specified by regulations. Labels shall not be false or misleading, including in
regard to implied health claims or place of origin of the food product. Importers of
packaged food products must adhere to laws requiring labelling information that includes
the name and address of the importer, generic or common name of the product, the net
quantity, date of manufacture, best-before date and maximum sales price including any
taxes or charges. For more information, see the Government of India Ministry of
Commerce and Industry website. Product labels should be printed in English or Hindi
(Devnagari script) and must be completed before products are presented for Customs
clearance.
There are four main label options for imported packaged food:
• Printed and securely fixed to the package.
• Made on an additional wrapper containing the imported package.
• Printed on the package itself.
• Contained on a card or tape which is firmly fixed to the package.
General Requirements: Part VII of the PFA Rules, 1955, and the Standards of
Weights and Measures (Packaged Commodities) Rules, 1977, as amended,
establish labeling requirements for all packaged foods. In general, the label should
provide the following information:
Maximum retail price (MRP) where applicable, the product label should also contain the
following:
> The purpose of irradiation and license number, in case of irradiated food
> Extraneous addition of coloring matter
> Non-vegetarian food (any food which contains whole or part of any animal
including birds, marine animals, eggs, or product of any animal origin as an
ingredient, excluding milk or milk products), must have a symbol of a
brown color-filled circle inside a square with a brown outline prominently
displayed on the package, contrasting against the background on the
principal display panel, in close proximity to the name or brand name of the
food.
> Vegetarian food must have a symbol of a green color-filled circle inside a
square with a green outline prominently displayed on the package,
contrasting against the background on the principal display panel, in close
proximity to name or brand name of the food.
There are special labeling requirements for certain packaged food items, such as infant
foods, condensed milk, milk powder, blended vegetable oils, etc. For details see Section
42, Part VII of the PFA Rules updated on October 1, 2004,
(www.mohfw.nic.in/pfa%20acts%20and%20rules.pdf) and any subsequent notifications.
In the case of imported packaged food, all declarations may be 1) printed on a label
securely affixed to the package or 2) made on an additional wrapper containing the
imported package or 3) printed on the package itself or 4) made on a card or tape affixed
firmly to the package or container and bearing the required information. Labels must be
printed in English or Hindi (Devnagari script). The responsibility for labeling lies with the
importer, and should be done before products are presented for custom clearance.
http://dgftcom.nic.in/exim/2000/not/not00/not4400.htm
Shelf Life: Notification No. 22 (RE-2001) 1997-2002, dated July 30, 2001,
issued by the Department of Commerce, states:
"Imports of all such edible/food products, domestic sale and manufacture of which are
governed by the PFA shall also be subject to the condition that, at the time of importation
[emphasis added], these products are having a valid shelf life of not less than 60 percent
of its original shelf life. Shelf life of the product is to be calculated, based on the
declaration given on the label of the product, regarding the date of manufacture and the
due date of expiry." http://dgftcom.nic.in/exim/2000/not/not01/not2201.htm
Per notification G.S.R. 388 (E), issued by the Department of Health, on June 25,
2004, every package of food which contains permitted artificial sweetener shall carry the
label "CONTAINS ARTIFICIAL SWEETENER AND FOR CALORIE CONSCIOUS," along with
the name or trade name of the product. (www.mohfw.nic.in/GSR%20388(E).pdf)
Per notification G.S.R. 339 (E), dated May 27, 2005, issued by the Department of
Health, "No containers or label relating to infant milk substitute or infant food shall have
a picture of infant or women or both. It shall not have picture or other graphic materials
of phrases designed to increase the salability of the infant milk substitute or infant food.
The terms "Humanized" or "Maternalized" or any other similar words shall not be used.
The package and/or any other label of infant milk substitute or infant food shall not
exhibit words, "Full Protein Food," "Energy Food," "Complete Food," or "Health Food," or
any other similar expressions." (www.mohfw.nic.in/F33927052005.pdf
Implied nutritional and health claims are allowed on food products, and there are no
statutory nutritional requirements. Manufactured and imported food claiming to be
enriched with nutrients such as minerals, proteins, or vitamins, should indicate quantities
of such added nutrients on the label. Although there is no official position on implied
health claims, such claims should be able to withstand verification by a court of law, if
challenged.
On August 13, 2003, the Department of Health issued a final Gazette notification under
the PFA Act that prohibited the sale of fresh fruits and vegetables coated with waxes (both
edible and non-edible), mineral oils, and colors. www.mohfw.nic.in/656( E) Dated
13.8.03. pdf
On December 1, 2004, the Department of Health issued a final Gazette notification that
lists permitted food additives in fish and fish products and microbiological requirements of
seafood. www.mohfw.nic.in/GSR821( E)21102004.pdf
On March 21, 2005, the Department of Health issued a final Gazette notification under the
PFA Act that pertains to the use of additives in sugar, salt, cocoa powder, chocolate, sugar
boiled confectionary, and chewing gum. www.mohfw.nic.in/F18421032005.pdf
On March 21, 2005, the Department of Health issued a final Gazette notification under the
PFA Act that provided a list of permitted food additives and microbiological requirements
of thermally-processed fruits, fruit cocktail, vegetable soups, fruit juices, fruit vegetable
cereal flakes, squashes, tomato ketchup, tomato sauce, soy sauce, jam, jelly, etc.
www.mohfw.nic.in/F18521032005.pdf
16.5 Pesticides and other contaminants
The PFA Rules, 1955, include a positive list for the presence of pesticide residues in
various commodities and food (manufactured/imported) products, and their respective
tolerance levels. Of the 189 pesticides registered (http://cibrc.nic.in/reg_ products.htm)
for regular use in India, only 121 (www.mohfw.nic.in/pfa%20acts%20and%20rules.pdf,
Part XIV pages 163-177) have Maximum Residue Limits (MRLs) notified. There are 27
pesticides that do not require MRLs. For the remaining pesticides, MRLs have not yet
been established. CODEX Alimentarius MRLs may be accepted for imported foodstuffs
only for those pesticides not included in India's own positive list of pesticides.
All imported foods are randomly sampled at the port of entry for their conformity to PFA
standards. On June 16, 2004, with immediate effect, the Ministry of Commerce and
Industry published a list of "high risk" food items, imports of which are subject to 100
percent sampling. This list includes edible oils and fats, pulses and pulse products, cereal
and cereal products, milk powder, condensed milk, food colors, and food additives, among
other items. The import of product samples via express mail or parcel post is allowed,
contingent on obtaining prior permission from the Directorate General of Foreign Trade.
Mail order imports are not allowed. Contact information to arrange sample shipments is
provided in Appendix I. Once the products enter the domestic market, they are to be
monitored randomly at the retail and wholesale level by the respective regulatory
authorities.
The PFA Rules, 1955 (Appendix B), and the Fruit Products Order, 1955, as
amended, contain definitions and specific quality standards for certain food products, such
as processed cheese, ice cream, spice mixes, milk and milk products, infant food,
vegetable oils and margarine, fruits and vegetable products, and basic food items like
wheat, rice, and pulses. Imported products must also meet the specified quality
standards.
The Indian Copyright Act of 1957 is based on the Bern Convention on Copyrights, to
which India is a party. May 1995 and December 1999 amendments increased protection
and introduced stiff mandatory penalties for copyright infringement. On paper, Indian
copyright law is now on par with the most modern laws in the world. Trademark
protection was raised to international standards with the passage of a new Trademark Bill
in December 1999. It codified the use and protection of foreign trademarks, including
service marks. Enforcement of intellectual property rights has been weak, but the
situation is improving, as the courts and police respond to domestic concerns about the
high cost of piracy to Indian rights holders.
The clearance of imported food products at the port of entry requires a certification from
the port health authority that the product conforms to the standards and regulations of
the PFA. However, certification is based mostly on visual inspection and records of past
imports, as most ports have very limited testing facilities. Consequently, importers of
new products can sometimes face undue delays in clearing their products. The custom
clearance period may last between one day and one month, depending on the product
and experience of the importer. In case of a dispute or rejection of the consignment, the
importer can file an appeal at the Customs office at the port of entry.
C. Phytosanitary issues
E. Ministry of Commerce
Joint Secretary
Ministry of Food Processing Industries
Panch Sheel Bhawan
August Kranti Marg
New Delhi - 110 049
Phone: (91-11)26492475
Fax: (91-11)26493228
E-mail: anpsinha@mofpi.delhi.nic.in
Website: http://mofpi.nic.in/
G. Registry of Trademarks
Chairman
Central Board of Excise & Customs
Ministry of Finance
North Block
New Delhi - 110 001
Phone: (91-11)23092849
Fax: (91-11)23093215
E-mail: cbecoff@finance.delhi.nic. in
Website: http://www.cbec.gov.in/
Part 17 EXHIBITIONS
OVERVIEW
Logistics is one of the key economic activities throughout the world. The global logistics
industry was estimated to be about US$3.5 trillion in 2005. The contribution of logistics
industry to India’s GDP has gone up in the recent years from 7.4% in 1999-2000 to 9.3%
in 2004-05.
18.1 INFRASTRUCTURE
With a coastline of nearly 4,000 miles, India has 11 international and 139 minor ports.
The international ports are Kandla, Mumbai, Jawaharlal Nehru, Cochin, Murmagoa, and
New Mangalore on the west coast, and Chennai, Tuticorin, Vizagh, Paradeep, and Kolkata
on the east coast. Container handling facilities are available at most major ports and in
several major cities. India has a vast railway network connecting most major cities and
towns. Refrigerated warehousing and transportation facilities are limited and costly,
resulting in high storage losses in perishable food items. An inadequate and erratic
electric power supply constrains cold chain development. Whereas infrastructure projects
were previously reserved for the public sector, private investors are now being
encouraged to participate. Telecommunications, in particular, is benefiting from
privatization and strong foreign investor interest. The pace is much slower, however, for
power generation, roads, and other infrastructure needs, where the returns on investment
take longer to materialize.
The East & Northeast Region consists of: Andaman & Nicobar Islands; Arunachal Pradesh;
Assam; Bihar; Chhattisgarh; Jharkhand; Manipur; Meghalaya; Mizoram; Nagaland;
Orissa; Sikkim; Tripura and; West Bengal. The region had an estimated population of
287.0 million (2001).
The North Region consists of: Chandigarh; Delhi; Haryana; Himachal Pradesh; Jammu &
Kashmir; Punjab; Rajasthan; Uttar Pradesh and; Uttaranchal. The region had an
estimated population of 307.7 million (2001) .
The South India Region consists of: Andhra Pradesh; Karnataka; Kerala; Lakshedweep;
Pondicherry and; Tamil Nadu. The region had an estimated population of 224.3 million
(2001).
The most attractive market in this region is Pondicherry which an estimated 2001
population of 974,345 people. Tamil Nadu is also an important market with an estimated
population of 62.4 million.
The West India Region consists of: Dadra & Nagar Haveli; Daman & Diu; Goa; Gujarat;
Madhya Pradesh and; Maharashtra. The region had an estimated population of 209.6
million (2001).
The most attractive market in this region is Goa which has an estimated population of 1.3
million. Maharashtra is also an important market with an estimated population of 96.9
million.
The 35 states and union territories of India differ greatly in natural resources, religion,
language, culture, food habits, living standards and purchasing power. As a result there
are important differences among regions in the demand for packaged food.
The East & Northeast region is the least developed area and has the lowest per capita
income of the four regions. Consumers prefer to purchase food from wet markets or
through the unbranded channel. The unorganized channel is of major importance in this
region and branded food manufacturers are still adjusting their marketing mix. Retail
sales of packaged food in East & Northeast India is expected to increase at an annual
compound rate of 5.73% (on an INR basis) between 2004 and 2009 reaching INR 86.74
billion. This region is expected to experience the fastest growth from the smallest 2004
base.
North India generates significant sales of such segments as bakery products, ice cream,
sweet and savoury snacks, and dried processed food. Demand growth in North India is
driven by increasing disposable incomes, the need for convenience food and increasing
acceptance of western cuisine. These shifts are particularly apparent in rural areas.
Consumers are moving from cheaper, unbranded products sold through the unorganised
channel to packaged food. Retail sales of packaged food in North India is expected to
increase at an annual compound rate of 4.22% (on an INR basis) between 2004 and 2009
reaching INR 139.32 billion.
South India is an affluent market that is tough to access. The majority of South Indians
have very conservative dietary habits, and tend to consume local cuisines. Retail sales of
packaged food in South India is expected to increase at an annual compound rate of
4.78% (on an INR basis) between 2004 and 2009 reaching INR 115.96 billion.
The population in West India has the highest per capita income of the four regions and
are sophisticated consumers with a high level of product awareness. They are willing to
accept and experiment with foreign foods such as: pastas, soup, breakfast cereals, sauces
such as mayonnaise and salad dressings. Chinese and Italian cuisines are also accepted.
Retail sales of packaged food in West India are expected to increase at a compound rate
of 4.03% per year (on an INR basis) between 2004 and 2009 reaching INR 144.22 billion.
18.4 Forecast Value of Retail Sales of Packaged Food by Region. India. 2004 to
2009.
Region 2004 2005 2006 2007 2008 2009 Annual
(Billion (Billion (Billion (Billion (Billion (Billion Rate of
INR) INR) INR) INR) INR) INR) Increase*
(%)
East & 65.77 69.21 73.15 77.43 82.01 86.74 5.73
Northeast.
Cost of transportation
In developed countries like the US, logistics costs comprising transportation costs account
for 7-9% of the cost of the final product; warehousing cost account for about 1-2% and
inventory holding costs for about 3-5%. In developing countries, logistics costs are
estimated to be higher at around 15-25% of the final cost of the product due to lack of
adequate logistics system. In India, logistics cost is around 13%, comparatively higher
than the developed countries.
Indian Seaports
India has more than 6,000km of natural peninsular coastline with over 12 major ports and
187 minor/intermediate ports, which link international supply chain network. These ports,
the gateways to India’s foreign trade, handle 90% of seaborne trade in the country. There
has been a dramatic change in India’s maritime trade since the removal of trade barriers.
Previously, Indian ports used to handle only bulk cargos like oil, fertilisers and food grains.
But abolishment of trade barriers has changed the entire maritime trade scenario. Trade in
consumer goods, machinery, auto components, textiles and processed foods is on the rise
and there is a growing trend towards containerisation in the country.
The major ports in India handle over 70% of total port traffic and these ports are governed
by a port trust appointed by the Government of India and tariffs are regulated by the Tariff
Authority of Major Ports. In 2005-06, the major ports together have handled 423.41m
tonnes of cargo traffic out of the total 604.58m tonnes of cargo from all ports in the
country. In the same year, Visakhapatnam port handled 56m tonnes of cargo against 50m
tonnes in 2004-05, the highest in the country. Kolkata port ranked second with 53m
tonnes of cargo against 46m tonnes in 2004-05. However, in terms of port traffic growth
rate, Mumbai topped with a growth rate of 25% to 44m tonnes of cargo in 2005-06 against
35m tonnes in 2004-05. Both Kolkata and Jawaharlal Nehru Port Trust (JNPT) share the
second position in terms of growth rate in port traffic at 15% each.
The average output per ship berth day shot up to 9,298 tonnes in 2004-05 from 9,079
tonnes in 2003-04, while pre-berthing time at major ports has increased to six hours in
2004-05, from 4.9 hours in 2003-04. In 2004-05, the average turnaround time at major
ports has improved to 3.41 days from 3.45 days in 2003-04. Ennore port recorded the
lowest average turnaround time in 2004-05 with 1.68 days from 1.94 in 2003-04, while
JNPT ranked second in terms of average turnaround time in 2004-05 at 1.84 days from
2.04 days in 2003-04.
Air Cargo
The cargo handled at Indian airports has gone up at a CAGR of 7.8% from 0.65m tonnes in
1995-96 to 1.3m tonnes in 2004-05. However, international cargo handled at Indian
airports has increased at 6.8% per annum, while domestic cargo has increased at 9.9%
per annum. The five major airports have accounted for about 90% of the total cargo
handled in the country. During April-January 2005-06, all airports together handled
1,130,833 tonnes of cargo, which registered a growth rate of 9.4% against 1,031,224
tonnes of cargo during the same period in the previous year. However, international freight
traffic has registered a growth rate of 11.4% to 754,647 tonnes against 677,460 tonnes
during the same period in the previous year. Domestic freight traffic has registered a
growth rate of 5.7% at 376,186 tonnes against 353,765 tonnes in same period in the
previous year. Mumbai airport, the biggest of all the Indian airports, has handled around
31% of the total cargo.
At present, about 50 carriers operate cargo and passenger services to and from India. The
growth in airfreight cargo has improved the infrastructural facilities at many airports as
there is better connectivity with many low-cost airline service providers starting operations
in the domestic sector. Higher economic growth, open sky policy, higher number of export
promotion zones and better infrastructural facilities have attributed to the higher growth in
air cargo industry in the country.
In India, cargo terminals are managed by Air India and Indian Airlines at most of the
airports. However, at some airports, cargo terminals are managed by the State Trading
Corporations. But new cargo terminals, which are under construction, are managed by the
airports themselves, like Cochin and Chennai airports.
In view of the growing air cargo and its projected growth in the country, Airport Authority
of India (AAI) plans to set up cargo complexes at various airports in India. The AAI
manages cargo terminals in the following airports in the country—Kolkata, Mumbai,
Chennai, Nagpur, Guwahati, Lucknow and Coimbatore. Following are the various problems
faced in the cargo terminals of India:
Inland Waterways
India has over 15,544km of navigated waterways including rivers, backwaters and canals,
out of which only 5,200km of rivers and 485km of canals are suitable for mechanised
transportation. Despite the lower cost of moving cargo by inland waterways, the share of
inland waterways remains quite low. According to Inland Waterways Authority of India,
about 20m tonnes of cargo is moved using the Inland Waterways Transport system, which
accounts for just 0.15% of cargo transported by all inland transportation systems.
The Central Inland Water Transport Corporation was established as a public sector
undertaking in May 1967. It manages running of services from Kolkata to Bangladesh and
to Assam as well as lighterage services in the River Hooghly and services from Kolkata to
Allahabad. It also carries out the construction and repair of small and medium sized
vessels as well as repairs of ocean-moving vessels.
Road Transportation
India, with its 3.3m km road network, has one of the largest road networks in the world,
comprising 65,569km of national highways, 128,000km of state highways and 470,000km
of major district roads and the rural and other district roads of 2.65m km. Roads and
railways are the two major modes of surface transportation in the country. Roads have
dominated railways both in terms of passenger numbers and in terms of freight traffic. In
India, road transport accounts for about 85% of passenger traffic (surface transport) and
70% of freight traffic, while railways constitute only about 15% of passenger traffic and
30% of freight traffic in the country. There has been a phenomenal growth in the
registered goods vehicle from 82,000 in 1950-51 to 3,045,000 in 2001-02. The revenue
generated by road transport has gone up from Rs47 crore in 1950-51 to Rs45,000 crore in
2001-02.
The Government of India and the state governments are implementing various road
development projects and a lot of construction activities are going on in this sector. The
5,846km Golden Quadrilateral ( National Highways connecting four metropolitan cities i.e.
Delhi, Mumbai, Chennai & Kolkata having an aggregate length of 5846 Km. ) (Phase I of
NHDP) is expected to be completed by Dec 2006, and the Phase II North-South-East-West
corridor (7,300km) project is scheduled to be completed by the end of 2008. The Phase
III, which involves upgradation of 10,000km of national highways, is expected to be
completed by December 2009. In addition, the scope of NHDP has been enhanced to cover
four additional phases by covering 27,500km.
In the Union Budget of 2006-07, a new project known as the Special Accelerated Road
Development Programme covering 7,639km of road has been approved for the North-
Eastern region.
Railways
Indian Railways is one of the largest and busiest rail networks in the world. It is divided
into passenger and freight transport. Freight constitutes over 65% of its total revenue.
Indian Railways handled around 602m tonnes of freight (bulk commodities) in 2004-05. In
the freight segment, 95% of revenue comes from the bulk commodities such as iron ore,
cement, fertilisers, coal and food grains; coal alone constitutes about 50% of the revenue
from the bulk commodities. Indian Railways covers almost all parts of the country, with
routes covering a total length of 63,940km. As of 2005, Indian Railways owned a total of
216,717 wagons, 39,936 coaches and 7,339 locomotives, running a total of 14,244 trains
daily. In 2004-05, coal constituted about 45% ie 271.4m tonnes of total bulk cargo
handled by Indian Railways; food grains contributed 8% with 46.52m tonnes, iron and
steel contributed 8% with 44.26m tonnes and cement contributed 9% with 53.77m tonnes.
Warehousing
In 2005, major ports in India had throughputs of 423.41m tonnes of cargo, while major
airports in the country handled around 1.5m tonnes of cargo. On the other hand, road
transportation in India handled over 77% of cargo, accounting for over 1,176 billion tonnes
in the same year. Total costs of warehousing and material handling in India was estimated
to be over Rs37,500 crore, which was more than 9% of total logistics costs in the country.
CWC is operating 517 warehouses across the country, with a storage capacity of 10.3m
tonnes. It provides warehousing services for different kinds of products ranging from
agricultural produce to sophisticated industrial products. Warehousing activities of CWC
include food grain warehouses, industrial warehouses, custom-bonded warehouses,
container freight stations, inland clearance depots and air cargo complexes.
Apart from storage and handling, CWC also offers services in the area of clearing and
forwarding, handling and transportation, procurement and distribution, disinfestations
services, fumigation services and other ancillary activities.