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Date : July 26, 2011                          Number Of Views : 159546                     Comments : 0

Coir is a natural fiber, extracted from the husk of coconut and used in products such as floor mats, doormats, brushes, mattresses etc. Technically, coir is the fibrous material found between the hard, internal shell and the outer coat of a coconut. Other uses of brown coir (made from ripe coconut) are in upholstery padding, sacking and horticulture. White coir is harvested from unripe coconuts, and is used for making finer brushes, string, rope and fishing nets.

                                             VARIETIES AND USE

There are two varieties of coir – brown coir and white coir. Brown coir is harvested from fully ripened coconuts. It is thick, strong and has high abrasion resistance. It is typically used in mats, brushes and sacking. White coir fibers are harvested from the coconuts before they are ripe. These fibers are white or light brown in color and are smoother and finer, but also weaker. They are generally spun to make yarn that is used in mats or rope.

In addition to various uses, Coir mats and Erosion Control Blankets are used to stop or control soil erosion too.

                         PLACES OF ORIGIN

Countries like India, Sri Lanka, Mexico, Vietnam, and certain Caribbean Countries produce Coir. Coir’s global production amounts to about 3,50,000 tonnes. India and Sri Lanka being major producers of coir account for around 90% of the world production.     

                        VARIOUS COIR PRODUCTS

Following are the different types of coir products and bi-products

1.         Coir Fiber

2.         Coir Yarn

3.         Floor Mats

3.         Curled Coir

4.         Mattresses

5.         Coir Ropes

6.         Anti-weed blankets

7.         Erosion Control Blankets

6.         Fishing Nets

7.         Coir Pith – A bi-product

                        MAJOR PLAYERS IN COIR INDUSTRY

The golden textured Indian coir fiber that Andhra Pradesh, Orissa and Goa produce captured the European and world markets. From then on, there was the success of Indian coir’s reign, and it had no turning back. The big corporates soon established coir factories in Alleppey, Kollam, Kozhikode, Kochi and other parts of Kerala. Industrial giants including Volkart Brothers, William Goodacre, Pierce Leslie and Aspinwall moved in to tap the potential offered by the golden fiber, and Alleppey was soon a household name all over Europe and India           

                        COIR BOARD OF INDIA

Coir Board of India is a Statutory body established by the Government of India under a legislation enacted by the Parliament namely 'Coir Industry Act 1953 (45 of 1953)' for promotion and development of Coir Industry in India and upgradation of looms to increase productivity. Its official web site is http;//

 The Head Office of the Coir Board is at Ernakulam. Board works for the promotion, research, education and training of the coir industry. The Coir Board also participated in 11 international trade fairs and exhibitions during 2005-06 and displayed the range of products available for exports from India.


India is a major exporter of coir and coir products. Latest statistics released for financial year 2009-10 reveal that coir exports grew by 47% in volume terms and 26% in Rupee value terms, over the year-ago level. India exported coir and coir products worth Rs. 804 Crore in 2009-10 Fiscal.

In the 2010-11 Fiscal, the country’s total exports amounted to $247.4 Billion, while coir exports amounted to Rs.807.07 Crore.

Indian Coir Industry employs more than 1.5 lakh weavers and 4 lakh spinners. The industry has been going through a bit of rough patch because of the lack of modernisation and marketing effort. Indian Coir industry is second to agriculture as a source of employment in Kerala, providing employment to 3.83 lakh persons, of whom 3.25 lakh are women.

                        COIR EXPORTS

At present, coir and its products are exported to more than 80 countries, with US being the biggest market with a share of more than 40% in the total export. European countries together share more than 41 % of the exports.

Kerala is the home of Indian coir industry where white fiber, accounting for 61% of coconut production and over 85% of coir products are from women. With 10.05 lakh hectares having coconut cultivation in Kerala, which accounts for 45% of the net cropped area. The coconut out put is estimated at 5759 million nuts annually                

                        MAJOR COIR IMPORTERS

Statistics reveal that US is the largest market for Indian coir products accounting for more than 37 percent of total export, while EU countries import more than 41 percent and remaining share is distributed among Germany, Netherlands, Italy, and Belgium.

                                 GOVT OF INDIA IN SUPPORT OF COIR INDUSTRY

 The Government set up Coir Board under the provisions of Coir Industry Act, 1953 for overall development of coir industry. With a view to making the traditional industries more productive and competitive and facilitating their sustainable development, Ministry of Micro, Small & Medium Enterprises has two schemes: Scheme of Fund for Regeneration of Traditional Industries (SFURTI), Rejuvenation, Modernisation & Technology Upgradation of Coir Industry  (REMOT).

                             Export Statistics of Coir and Coir Products

  Quantity in Tonnes & Value in Rs. Lakh :



Quantity    Value


 Quantity    Value


  Quantity              Value

Curled Coir







Coir fibre







Coir Rugs & Carpet







Coir Pith







Coir Rope







Coir other sorts







Coir Yarn














Handloom Mats







Handloom Mattings







Powerloom Mats







Powerloom Mattings







Rubberised coir







Tufted Mats















A significant prospect for coir is the growing global concern to address ecological problems through use of Bio-degradable & natural resources for environment protection. Coir nets or geo-textiles and bio-logs or fascines, two of the most important coir products today, have been proven to be effective materials in controlling steep and road slopes erosion and for riverbank protection in technologically advanced countries.

Geo-textiles are coir-based matting materials placed in sloping lands and embankments to hold soil and permit vegetative growth. It helps in erosion control and soil productivity conservation. Bio-logs or fascines are tubular structures of coir mats or nets filled with dust, peat or coir resembling large rolls or gabions. 

Locally, coir and its products have gained acceptance as alternative erosion control materials. A number of projects of the Department of Public Works and Highways (DPWH) and by the private sector found geo-textiles more advantageous than other traditional materials such as concrete construction materials for erosion control specifically on the following concerns:

The over-all cost of coir as erosion control material was lesser by two-thirds. It is comparable in durability as long as the soil is well stabilized prior to its installation. And coir being eco-friendly and biodegradable, it promotes vegetation growth as it traps topsoil and keeps its nutrients intact.

Coir dust, meanwhile, has gained more attention from local gardeners and plant enthusiasts as they now use this material for organic compost and soil conditioner. The agriculture sector, therefore, is a big potential market for coir dust as organic fertilizer and as growing medium for the country’s vast agricultural lands and crops.

The use of coir for various industrial applications need to be explored. In July 2003 Consultation on Natural Fibers, FAO reports indicated that coir has a potential as a natural fiber composite for trucks and in automotive parts as roof liners, floor carpets, seat back trims, engine compartment insulation, package trays, luggage compartments, textile exterior, wheel arc liner, rear and side wall covers and driver cabin liner. Experiments showed that advantages of coir over other natural materials are its being low cost and light weight. Moreover, coir has properties suitable for acoustic insulation, has no abrasive wear, is non-skin irritant and ecologically friendly.

 Export of coir projects are projected to further grow by 1.2% per annum to 80,000 tons in 2012, while exports of fiber are expected to expand to about 123,000 tons.

Blog Author : Dr. Amit K Chatterjee        Tags : Indian Coir Industry, Coir pith, mattress, curled coir

Blog Sector : Industry Analysis

Blog Categories :


Date : April 1, 2011                          Number Of Views : 6900                     Comments : 0

Indian merchandise export is rising at very encouraging rate, clocking 32% growth during Jan 2011 and an astounding 50% during Feb  2011. Indian merchandise export has already crossed USD 200 billion target and is set to touch USD 225 billion by the end of 2010-11 financial year.

Fuelling this impressive growth is rising demand from Latin American countries.  Timely help from Govt of India in terms of export incentives and other direct and indirect market diversification aids has hugely helped Indian exporters to explore new markets in Latin America, Africa and Asia.

Given the fact that India's traditional markets in Europe and North America are yet to shake off recession blue completely - Indian exporters should concentrate Latin American and other emerging markets seriously.

Here's a wonderful opportunity for Members of InfoBanc and Faida subscribers.

Hon'ble Minister of State for Commerce & Industry, Shri  Jyotiraditya Scindia shall be visiting Brazil, Argentina & Uruguay from 26th April – 5th May 2011, accompanied by a high powered Indian business delegation.

 Federation of Indian Chambers of Commerce and Industry (FICCI) along with Department of Commerce, Ministry of Commerce & Industry, Govt of India is organizing this business delegation to Brazil, Argentina and Uruguay.

InfoBanc, as partner of FICCI, invites you to join this business delegation and take part in b2b meetings organized in respective countries (please see  itinerary below). Given the importance of ministerial visit and accompanying networking opportunities, I strongly urge you to participate in this business delegation and explore new markets for your products.

The proposed itinerary of the visit would be:

April 26

Arrival in Brazil

April 27  – 1st May

Seminar, B2B Meetings, Industry Visit in Rio de Janeiro

May 2

Arrival in Buenos Aires, Argentina

May 2 - 3, 2011

Seminar, B2B Meetings, Industry Visit in Buenos Aires, Argentina

May 3 (evening)

Arrival in Montevideo

May 4- 5, 2011

Seminar, B2B Meetings, Industry Visit in Montevideo and visit to Punte del Este, Uruguay

May 5 (evening)

Departure for India

 Participants will bear their travel & accommodation expenses. In addition, a delegation fee of Rs. 25,000 is to be paid to FICCI towards delegation expenses such as printing of who’s who,  communication expenses, etc.

If interested - please send an e-mail to with subject 'FICCI Business Delegation' with name of participant, brief background of your company and complete contact details. On receiving your response - I shall send you necessary information.

As number of delegates is limited - please send your response immediately.

Best Regards

Dr. Amit K Chatterjee

Blog Author : Dr. Amit K Chatterjee        Tags : trade promotion, latin american market, brazil, argentina, uruguay, business delegation

Blog Sector : Foreign Trade

Blog Categories : Trade Promotion / Trade Fairs / Event Management
Misc. Business / Financial Services


Date : January 28, 2011                          Number Of Views : 25289                     Comments : 0

Export is supposedly a high risk and high return business. While there is unanimity on risk part – question mark hangs over high return part as negative change in exchange rate may rob an exporter even after overcoming external risk factors such as credit risk. Unlike credit risk, which is an external factor and can be mitigated partly through insurance  (please see earlier article on export risk mitigation ).– currency fluctuation is a domestic issue and completely outside the control of exporter or banks. It can make a product competitive or pricey, rob exporter of all gains from a successful overseas transaction or may make a long term supply contract completely unviable or uneconomic midway its execution.

Its necessary to understand extent of this threat and more importantly, how to manage the risks and available measures.

How Serious is The Threat of Currency Fluctuation

Currency fluctuation may not be considered as risk in countries with fixed exchange rate such as China , India till 1992 or those experiencing relatively stable exchange rate for years. However, in countries like India it’s a severe risk today as abrupt evaluation or devaluation of exchange rate may make an exporter pauper or richer. Let us chart the course of rupee over last few years.

Indian rupee has seen sharp volatility since Financial Year (FY) 2008 due to substantial FII inflow/outflow. The rupee appreciated to 39.4 per dollar in January ’08 compared to 44.00 a dollar in March ’07. After appreciating for almost 16 months, the rupee started depreciating and fell to an all time low of 51.2 a dollar in March ’09, due to FII outflows. However, the strong recovery of the economy followed by robust FII inflows in the equity market has once again led to a sharp appreciation of rupee in October ’10. The fluctuations have become so sharp since 2007 that apex body of exporters, Federation of Indian Exporters Association has suggested full convertibility of Rupee. In his first interaction with the Capital’s media since he took over as FIEO chief late last month, Mr Ramu Deora expressed concern saying  its good neither for exporters nor importers but only helps speculators, and suggested full convertibility of the rupee to tackle high volatility in the exchange rate.

Why Exchange Rates Fluctuates ?

Let us see underlying reasons for change in exchange rates between Rupee and US Dollar and attempt to correlate to present situation.
Appreciation or depreciation of Rupee against the dollar depends mainly on demand and supply equation between both the currencies. If the demand for rupee is comparatively higher, rupee appreciates; if low, it depreciates. The factors that drive the demand supply for a particular currency are:

  • Interest Rate: A demand for a currency is hugely dependent on the interest rate differential between two countries. A country like India where int. rate is around 7-8% experiences greater capital inflow as investors get better return than what they might get in US. (with Interest rates of 2-3%). This results into rupee appreciation.
  • Rate of Inflation: The demand for a country’s goods & services by the foreign buyers would be more if the inflation rate is lower in that country compared to other countries. Higher demand for goods & services would mean higher demand for that currency resulting in the appreciation of that currency. For instance if India’s inflation rate is lower than that of Zimbabwe then the demand for our goods, services and currency would be higher than that for Zimbabwe’s.
  • Export-Import: If a country is exporting more than its imports from other countries, then this would mean higher demand for that currency, causing appreciation of that currency against others.
  • Trading in currencies in the Forex market: The exchange rate fluctuates minute by minute because of speculative trading in the Forex market.

Impact of Currency Fluctuation

  • Impact on economy: Exchange rate fluctuation has a significant impact on the overall economy of a country. Rupee appreciation against US dollar is an indication of the strengthening of Indian economy with respect to US economy.
  • Impact on foreign investors: If a foreign investor invests in Indian stock market and even if its value doesn’t change in 1 year, he’ll earn profit if rupee appreciates and make a loss if it depreciates. You can understand this with an example:
    • Suppose an FII Invests Re. 1 Cr. in the Indian stock market and at an exchange rate of $1 = Rs. 50. So, the amount invested is $200,000.
    • Suppose, after 1 year, even if the value of investment doesn’t appreciate the foreign investor can earn a profit if the exchange rate has changed to $1 = Rs. 40 (Rupee appreciation)
    • If the investor sells his investment and converts the currency, he would get $ 250,000. So, he would earn $ 50,000 as a profit thanks to a change in the exchange rate i.e. rupee appreciation
    • So, a continuously appreciating rupee would lead to greater investment by the FIIs.
  • Impact on industry/companies: Appreciation of the rupee makes imports cheaper and exports expensive. So, it can spell good news for companies who rely on import of goods like heavy machinery, technology, micro chips etc. According to reports by Associated Chambers of Commerce and Industry of India (ASSOCHAM) sectors like Petro & Petro Products, Drugs & Pharma and Engineering Goods which have import inputs of as much as 77%, 19% and 21% respectively would stand to gain the most if rupee appreciates. They would have to pay less for the imported raw materials which would increase their profit margins.
  • Similarly, a depreciating rupee makes exports cheaper and imports expensive. So, it is welcome news for sectors like IT, Textiles, Hotel & Tourism etc. which generates revenue mainly from exporting their products or services. Rupee depreciation makes Indian goods & services cheaper for the foreign buyers thus leading to increase in demand and higher revenue generation. The foreign tourist would find it cheaper to come to India thus increasing the business of hotel, tours & travel companies.

How to Manage Currency Fluctuation Risk ?

Rupee appreciation affects all exporters – however, SMEs are likely to suffer more as large businesses can soften the impact of rupee appreciation on their earnings by hedging their export contracts in the forward market. SMEs, in contrast, are the worst hit, as their export contracts are generally not hedged. This reduces the export realisation of SMEs, which would affect their bottom line if the loss from the foreign currency transaction is not passed on completely to the customer.

To manage foreign exchange risks, SMEs can opt for either selective hedging or systematic hedging. In selective hedging, SMEs that have significant but short-term exposure to foreign currency can hedge a part of their total exposure and can make a gain or loss from the unhedged portion. Selective hedging is also done when there are expectations of a favourable movement in exchange rate at the future date. In systematic hedging, SMEs can hedge their entire export contracts. SME exporters can reduce their exchange rate risk through currency diversification, forward contracts, swaps and call and put options.

In India, dollar-rupee futures are traded on three recognised exchanges, namely NSE, BSE and MCX. Further, an RBI notification on January 19, 2010 has permitted direct hedging of currency risk in other currency pairs like euro-rupee, Japanese yen-rupee and pound sterling-rupee. The introduction of new currency pairs in the currency futures market would help market participants to hedge against cross-currency volatility and mitigate exchange rate risk across all major traded currencies. Moreover, currency futures are traded at transparent, market-determined rates that are available to all market participants. Besides, market participants do not require to have an underlying exposure in foreign currency. Currency futures have the advantages of easy accessibility, easy affordability, low transaction costs, transparency and efficient price discovery.

Despite the availability of new hedging avenues, a very small number of SMEs enter into currency futures transactions to hedge their risk. This can partly be attributed to the small size of their international business, because of which SMEs usually do not get the best deal from OTC forward desks of banks or primary dealers to hedge their risk. Besides, the quotes offered to SMEs are at a higher premium. Also, various misconceptions and the lack of awareness amongst SME exporters about currency hedging hold back SME exporters from the currency futures market.Given the strong fundamentals of the economy, coupled with the widened interest rate differential between India and other developed economies, FII inflows are expected to remain robust in the coming months, leading to further appreciation of the rupee. Hence, there is a greater need for SMEs to have an effective and smart strategy in place to mitigate the exchange rate risk. Further, it is essential for small units to evaluate their cash flow positions and assess the degree of influence of exchange rate fluctuations on their profitability. Also, before sealing an exports deal with an overseas client, SMEs should keep the option of entering into a price variance with their customer, based on exchange rate fluctuations.

Blog Author : Dr. Amit K Chatterjee        Tags : currency fluctuation, exchange rate

Blog Sector :

Blog Categories : Financial Services / Banking / Insurance


Date : November 25, 2010                          Number Of Views : 28324                     Comments : 1

Letter of credit (L/c) is a widely accepted and commonly used payment method in international trade. They are usually issued by larger banks and contain a promise to pay a seller (beneficiary) upon receipt of goods by a buyer if certain conditions outlined in the letter have been met.

There are three general principles governing the use of letters of credit:
  1. The banks' responsibility to deal in documents only;

  2. the rule of strict construction, which dictates that the terms and conditions of the letter of credit are to strictly adhered to; and

  3. the rule of independence, which mandates that the letter of credit is to be considered independent from the sales contract or any other agreement between the parties.

Put simply, the Issuing bank has two main roles:
  1. To give a binding undertaking to the seller that if compliant documents are presented, the bank will pay the seller the amount due. This offers security to the seller

  2. To examine the documents, and only pay if these comply with the terms and conditions set out in the letter of credit. This protects the buyer's interests

Note that the letter of credit refers to documents representing the goods - not the goods themselves! Banks are not in the business of examining goods on behalf of their customers. Typically the documents requested will include a commercial invoice, a transport document such as a bill of lading or airway bill, an insurance document; but there are many others.

How secure is the L/c payment method ? Although an L/c is considered one of the most secure means of payment, exporters should understand that they can never totally control the payment process. Documents which are required to be presented under an L/c are frequently prepared by other people, and may not meet the strict compliance standards required by the banking community for payment. Sometimes banks which have not properly ensured their own reimbursement by customer (the buyer), apply very narrowly L/c principles to deny payment. Such denials have regularly been upheld by courts on grounds that the seller has not strictly complied with the terms of the L/c.

How to Secure your Payment ?

Like most other things in life -prudence, knowledge and certain precautions can greatly reduce your risk. Following are certain steps that an exporter can take to maximize his control of the L/c process

Knowledge is Power

The rules governing L/c are codified in a publication sponsored by the International Chamber of Commerce ("ICC"), known as the Uniform Customs and Practice for Documentary Credits. Professionals advising exporters should have a good understanding of the UCP 500. The rules in the UCP 500 are drafted by and for the banking community. One of the major purposes is to protect the banks from liability in L/c transactions. The banks are providing a service - the financing of the transaction - and they expect to be protected from getting involved in disputes between the parties as to the terms of the contract of sale. For this reason "the independence principle" is a very important concept in LC transactions. This means that the LC, and the documents required under the LC for payment, are completely independent from the underlying transaction between buyer and seller.

The bank is not concerned if the contract between buyer and seller is being performed according to its terms. The bank's only concern is whether the documents presented by the seller conform to the documents required under the LC, and whether the documents are presented within the required time periods. The bank employees who examine documents presented under the L/c are essentially clerks. Their job is not to make judgment calls, but simply to see if the documents presented by the seller/ beneficiary comply strictly with the documents required by the LC. It is therefore very important to understand the rules as a lack of knowledge may invite disaster.

Your choice of Issuing Bank

One way of securing some control on payment process is to choose a bank you know or familiar with. This implies that during negotiating seller should try to get the buyer to use a bank of the seller's choice to issue the L/c. The seller should find out from his/her own bank, preferably a bank with a substantial international presence, what corresponding bank it uses in the country of the buyer. If the buyer can have the L/c issued by that correspondent bank, the process can proceed more expeditiously. At the very least, the seller should insist that the buyer use a bank that is well-known and highly regarded by the banking community. The seller's own bank can provide information on the financial status and reputation of the foreign bank. Since a major purpose served by an L/c is that the issuing bank assumes the risk of the buyer's insolvency, if the bank itself is financially weak, the L/c may not serve its purpose.

When in doubt - Get Confirmation

If the seller is not comfortable with the bank of the buyer's choice, the L/c should be confirmed by a prime world bank. When a prime bank confirms an L/c issued by a foreign bank, it takes upon itself the payment obligation. There is a charge for confirmation, which varies directly on perceived risk the prime bank believes it is taking in confirming the L/c. The question of who pays the prime bank's confirmation charges is negotiable, but if not negotiated in advance the bank may charge the beneficiary.

Simple Documentation

The seller should ensure during negotiation that as few documents as possible are submitted to bank, that documents should have simple description and all documents called for by the L/c can in fact be produced. Seller should avoid dependence on unknown or unreliable parties (e..g. if bank documents include a certificate from the government of buyer's country or a signature from someone under buyer's control - complications may arise).

Accuracy of Wording

Accuracy of wording in respect of all documents to be submitted in bank is vital. For example, almost all L/c's require production of a commercial invoice and a transport bill of lading. The invoice must state the description of goods in the same way as in L/c. If the goods are not described in exactly the same way, the seller may not be paid even though Bill of Lading may have correct wording.

Be sure what you are doing

If seller realizes there is a mistake or a problem with the documents to be submitted in bank, the goods should not be shipped until the L/c is amended. The UCP 500 makes clear that no amendment can take place unless the issuing bank, the confirming bank, if any, and the seller, agree to it. Unless the seller has written confirmation from the bank that the amendment to the L/c has been issued, and the confirming bank has accepted the amendment, he bears the risk of not being paid.

A stitch in time...

A prudent seller should not let buyer take possession of goods until he has been paid under the L/c. The reason is obvious - if there are discrepancies in the documents preventing payment of the L/c, a buyer in possession of the goods has much less incentive to waive discrepancies so the seller can be paid. If the seller is not paid by the bank, the buyer still has a contractual obligation to pay for goods, but the difficulty of collection can make the price drop substantially, even assuming the buyer is solvent and can pay something. Particularly when the goods have been shipped to a foreign country, the payment collection can be quite costly. The buyer, knowing this, may attempt to negotiate a lower price (that is if he pays at all).

To keep goods out of the buyer's possession till payment is settled, the seller should have the bill of lading consigned to order of the bank. Since the bill of lading is a title document, a consignment to order of the bank gives the bank title to the goods until they have been paid for by the buyer. Assuming proper payment, the bank transfers title to the buyer, who can then take the bill of lading and collect the goods. If buyer does not pay, the bank has an obligation to hold the documents for the seller, or return them to the seller if instructed to do so by the seller. The buyer should not be able to get the goods without the title document.

Look Before you Leap...

The buyer may ask seller to have the bill of lading made out to order and blank endorsed, and to send one or more sets to the buyer within a few days of shipping the goods. This is like writing a blank check. It enables the buyer to pick up the goods, and thereby provides him with a disincentive to waive any discrepancies in documents the seller presents to the bank. Given the high failure rate of initial presentations of documents under an L/c, a seller needs to know he will have the buyer's cooperation in correcting discrepancies or in waiving them. The buyer's cooperation will be more forthcoming if he cannot get possession of the goods until any problems with discrepancies have been resolved.

Know Your Deadline, for your sake...

Every L/c has three vital dates: the date by which goods must be shipped, the date by which documents must be presented, and the expiry date for the L/c. A seller should make sure that each of these dates can be met, and should allow a large margin for error. After the L/c has been issued, if the seller learns that the date for shipping goods cannot be met, he should not ship any goods until he obtains an amendment to the L/c permitting later shipment.

If an L/c which calls for transport documents does not contain a date by which documents must be presented, does this mean the seller can wait until the expiry date to present his documents? Not if he wants to be paid. Article 43 of the UCP 500 provides that if no time period after shipment is given in the Credit for presentation of documents, banks will not accept documents presented to them later than 21 days after shipment. An exporter unfamiliar with the 21 day rule of the UCP 500 could easily miss this deadline.

The exporter should make sure that the expiry date of the L/c permits sufficient time to permit correction, if possible, of any mistakes in the documents. Under the UCP 500, once the documents are presented, the bank has a maximum of seven days to let the beneficiary know if there are any discrepancies. If discrepancies can be corrected, they must be corrected and the documents resubmitted before the expiry date of the L/c. Thus the exporter should make sure that the expiry date allows enough time for errors to be rectified.

Finally - A Quick Checklist
Always make following checks with your L/c:

  • Did you receive the letter of credit directly from a bank? If your answer is "No" - do not proceed any further as the letter of credit has not been authenticated and may be fraudulent.
  • Is the letter of credit irrevocable? If your answer is "No", do not proceed any further as a revocable letter of credit can be "revoked" by the buyer without your consent.
  • Has the latest shipment date passed? If your answer is yes, the letter of credit must be amended to extend the latest shipment date.
  • Is the letter of credit : Confirmed by a U.S. or prime world bank ? Please see above for correct procedure
  • Is the amount on the credit correct?
  • Is the beneficiary's name and address correct?
  • Is the buyer's name and address correct?
  • Is the merchandise description correct and consistent with other documents? .
  • Do any of the documents in the credit need to be legalized?
  • Which documents are required in the Letter of Credit:
    • Commercial Invoice
    • Packing List
    • Insurance Certificate
    • Ocean Bill of Lading
    • Air Waybill
    • Other

Blog Author : Dr. Amit K Chatterjee        Tags : letter of credit, export import, export import payment, documentary letter of credit, l/c

Comments for this blog : 1        Blog Sector : Foreign Trade

Blog Categories : Misc. Business / Financial Services
Financial Services / Banking / Insurance


Date : November 19, 2010                          Number Of Views : 9107                     Comments : 0

Every business wants to increase sales, reach new customers, expand market share. The key to growing sales is not merely reaching new customers all on your own, but also to spread your product information (i.e promotion) in such a way that customers, hitherto unknown, get to know about your product and contact you on their own.

While direct marketing is comparatively easy to understand and implement, effective promotion needs creative thinking and innovative application. Successful marketing requires a clever mix of both direct marketing and promotion, ensuring maximum return on investment.

Some of the popular choices of direct marketing are : participation in trade fairs , visiting potential overseas buyers in target markets etc, all of which are rather expensive. In this article, we discuss a low cost option of reaching target markets - commercial representatives, agents and distributors . Contrary to popular belief - appointing representatives, agents and distributors in target markets can be done at zero or minimal cost. However, you need to know what's the best practice and how to locate reliable agents and distributors in Europe and USA. This article discusses when and how to appoint representatives, agents and distributors and lists free sources of information on how to locate reliable agents.

Building Overseas Presence Through Commercial Representative, Agents and Distributors

Commercial Representatives, Agents and Distributors constitute a very effective marketing channel for exporters. Imagine having your own man in overseas markets who, with their understanding of local language, culture and market trend can promote your products to right customer segments. An effective market representative can multiply your sales several times at a very reasonable cost. Besides, having physical presence of your business in target country add to customer comfort level significantly.

Representatives and Agents

These are generally individuals or small firms who do not purchase or maintain an inventory of your products. Their most obvious benefits are knowledge of local language and close proximity to existing and potential customers. They usually solicit orders from potential customers on behalf of the exporter (also called principal) and their compensation is a commission from the net export ex factory price or agreed fee. Orders are placed on behalf of the buyer, the agent usually does not get involved in shipping/ delivery.


Also called dealer, wholesaler or stockist, is a larger firm than commercial representative or agent. They have the product knowledge, qualified personnel, local sales network, physical facilities and financial resources to perform all of your export marketing functions. They are equipped to advertise, promote, order, purchase, transport, stock, deliver, finance and repair you products.

Distributors differ from agents in their ability to maintain a continuous inventory of products and spare parts for prompt delivery and reliable customer service. Distributors are compensated in the form of discount from gross export ex factory price and may enjoy other facilities like credit, promotion support etc.

Appoint Commercial Agent If:
  • It is an accepted distribution method in the country you are exporting to
  • You are unwilling to spend more or looking for an initial low-cost option to enter the target market
  • You do not need to maintain inventory in that country. For example, if you manufacture custom products, capital equipment, branded consumer products, or can have inventory shipped directly for individual orders, you probably do not need to keep stock and maintain a distributorship program in the country to which you are exporting
  • You want to maintain direct control of the sales of your products overseas. Since agents sell the product on behalf of the exporter, they must sell it at the exporter's price, under specified conditions and with prescribed representations and
  • You intend to benefit from corporate identity and intend to conduct business under your own name
Appoint Distributor If
  • It is the accepted distribution method in the country you are exporting to
  • You are satisfied that the target country is important for your marketing plan
  • You need to maintain inventory in the foreign country
  • You do not wish to invest in your own distribution network
  • Your corporate brand identity in the country is not essential
Free Information on Commercial Representatives, Agents and Distributors
There are business directories and web-sites on commercial agents and distributors. Most of these sources charge a fee for information. Besides, one does not know reliability of such paid information.

Perhaps a much better source of information is official association of agents and distributors in target countries. Information from such sources is far more reliable than directory listings as associations have membership criteria and a mechanism to enforce it. Besides, you have someone to fall back upon in case background information about a member is required.

Following is a list of Official Associations of Commercial Agents and Distributors

Add: Bundesgremium der Handelsagenten
Wiedner Hauptstrasse 63
A-1045 Vienna
Tel: 0043 5 90 900 -3200
Fax: 0043 5 90 900 – 287
Add: (UBAC) Union Belge des Agents Commerciaux (UBAC)
167 Boulevard Guilaume
1190 BRUXELLES, Belgium
Tel: 0032 23444545
Fax: 0032 23430243
Add: Cyprus Commercial Representatives Association (CCRA), P.O. Box 21455, 1509 NICOSIA
Tel: 00357 22 889890
Fax: 00357 22 667593
Add: Dansk Erhverv - The Danish Chamber of Commerce
Mr. Sven Petersen, Borsen
Tel: 0045 3374 6000
Fax: 0045 3374 6080
Add: Finnish Foreign Trade Agents' Federation (FFTAF)
Etelaesplanadi 18
Tel: 00358 986831650
Fax: 00358 986831651
Add: Association Professionnelle des Agents Commerciaux (APAC)
71, rue Pierre Corneille 69006 Lyon
Tel: + 33478526175
Fax: + 33478526174
Add: Fédération Nationale des Agents Commerciaux (FNAC)
30, Avenue de l'Opéra
75002 PARIS
Tel: 0033 144940500
Fax: 0033 144940510
Add: Centralvereinigung Deutscher Wirtschaftsverbände für Handelsvermittlung und Vertrieb (CDH)
Am Weidendamm 1A
10117 BERLIN
Tel: 0049 30 72625-600
Fax: 0049 30 72625-699
Add: Federation of Independent Commercial Agents Association (FICAA)
President: Mr. D. Karmalakos
3, Karitsi
GR-10561 Athens GREECE
Tel: +30 210 3311871
Fax: +30 210 3311870
Add: Federation of Independent Commercial Agents Association (FICAA), President: Mr. D. Karmalakos
3, Karitsi
GR-10561 Athens GREECE
Tel: +30 210 9339090
Fax: +30 210 9345475
Add: The Manufacturers' Agents' Association (MAA) Unit 16
Thrales End Harpenden Herts AL5 3NS UK
Tel: +44 0 1582 767618
Fax: +44 0 1582 766092
Add: Unione Sindicati Agenti e Rappresentanti Commercia Italiani Via della Sette Chiesa 144
I-00186 ROMA
Tel: 0039 06 514 35 215
Fax: 0039 06 516 06 147
Add: Federazione Nazionale Ass. Agenti e Rappresentanti di Commercio (FNAARC)
Corso Venezia 51
20121 MILAN
Tel: 00390 27645191
Fax: 00390 276008493
Add: Lithuanian association of commercial agents
P.O. Box 3464
LT03014 Vilnius
Tel: +37 0 686 261 02
Fax: +37 0 620 298 76
Add: Verbond van Nederlandse Tussenpersonen (VNT)
Postbus 74773
Tel: 0031 203057732
Fax: 0031 206710974
Add: Federation of Commercial and Service Enterprises Section for Commercial Agents
P.O. Box 2900 Solli
N-0230 OSLO
Tel: +47 22 54 17 00
Fax: + 47 22 56 17 00
Add: Col-legi Oficial d'Agents Comercials de Barcelona (COACB) Casp, 130
Tel: +34 9323194 12
Fax: +34 932455746
Add: (SAA) The Swedish Association of Agents
Box 3146
Tel: 0046 84110022
Fax: 0046 84110023
Add: Verband Kaufmännischer Agenten der Schweiz
Association Suisse des Agents-Représentants
Associazione Svizzera degli Agenti Rappresentanti
Swiss Commercial Agents’ Association
Ackersteinstr. 164, CH-8049 Zurich
Tel: 0041 44 340 18 88 / 0041 44 340 64 80
Fax: 0041 44 341 78 94
Add: Manufacturers' Agents National Association (MANA) Mr. B. Shirley, CPMR President/CEO 16 A Journey, Ste. 200 Aliso Viejo CA 9263056-3317 USA
Tel: 001 949 8594040
Fax: 001 949 8552973

Blog Author : Dr. Amit K Chatterjee        Tags : agents, distributors, export overseas agents

Blog Sector : Foreign Trade

Blog Categories : Agency / Distribution / Rep. Services
Marketing / Promotion Services


Date : November 11, 2010                          Number Of Views : 6982                     Comments : 0

Business over Internet - known as e-commerce or e-business - has its own peculiarities. To be successful in e-business – its essential that you understand these peculiarities and adopt in your marketing plan.

 First thing to understand about e-business is that its different from conventional business - not so much in the fundamentals, which is essentially same for all businesses, but in its approach to customers.

You might have a wonderful product and very competitive price line - but that holds no guarantee of success in e-business. This is not to say product quality or competitive price has no effect on sales - on the contrary these are extremely important qualities as competition is intense in Internet. However, these qualities come to play only when customer accepts you as seller. To understand why customers may not accept a seller on face value – we need to examine certain peculiarities of Internet based b2b marketplace

Unlike physical world where buyer and seller can meet, evaluate each other and satisfy themselves about each other's capability - Internet is virtual. Here buyer and seller are separated by thousands of miles, come from different countries, have different cultures and may even speak different languages. In other words - there's huge uncertainty.

To make matters worse for business - Internet is anonymous. It was designed for free exchange of information. Such anonymous culture is good for intellectual growth and societal development - but does no good for development of business confidence.

Nobody wants to do business with strangers - specially when significant amount of monetary transaction is involved.

So first step in Internet based b2b portal trade is to develop trusted relationship, remove uncertainty as much as possible and nurture mutual understanding.

 How to Build Trust ?

Trust develops between businesses through mutual interactions, commitments and delivery. Its a long drawn process. However, what happens when you interact with new customers ?  Internet offers the opportunity to reach thousands of new customers across the globe. How can these strangers come to trust you, if your first point of presence in their lives is through an anonymous e-mail ?

Be Trustworthy

The first step in building trust is to be 'trustworthy', to be perceived as dependable.  Help your customers know who you are and offer them an easy way to verify you. Your customer should be able to find your physical address where you can be contacted whenever needed,  information about your business, products, services and, if possible, some third party verification/certification such as ISO certification, association membership, customer testimonials etc.

How do you communicate all these qualities about your business through an easily accessible medium ? Obviously, the best way is to have a credible web-presence.

Importance of Credible Web-Presence in E-Business

Mark the word 'credible'. Does your web-presence inspires confidence ? What works with your friends may not work with your customers. You are in business and your customers expect businessman-like conduct from you. Social networks like Facebook or Wordpress may be good for promoting your business but can not be considered credible business platforms.

You need to invest in a professionally designed business web-site like Without a credible web-presence - its going to be an uphill task to convince new customers about your ability and close transaction.

Is that all ? Certainly not - professional web-site is only the beginning or rather foundation of trust building process. Next step is to build bridge with your customer through credible and professional communication.  First requirement of credible communication is business e-mail.

What is Business E-Mail and Why its so important in E-Business

E-mail is your face to anonymous world of Internet. In the absence of physical contact – you are represented by your communication. Make sure your communication is not only credible and professional – but is also able to stand-up in a crowd and be counted. Business e-mail ensures this feature.

Free Website + Free Business E-mail with infobanc Membership

infobanc membership comes with Free Website + Free Business E-mail

Even experienced businessmen sometimes make the mistake of not using business e-mail while communicating with customers. Before explaining vital importance of business e-mail - let me explain what is business e-mail.

Business e-mail - as opposed to free mails (such as hotmail, gmail, yahoo etc.) represents your business. Its a derivative of your web-site and usually takes the form of  or when your website address is Its never anonymous as one can easily identify owner of this e-mail by placing the part after @ in any Internet browser (i.e. placing in Internet Explorer).

To understand importance of business e-mail - consider a buyer who has floated trade enquiry for buying a product. As it happens in Internet - specially for popular products like garments, textile, handicraft etc. - the buyer receives dozens of responses from multiple countries. On opening his/her e-mail box - the buyer is confronted with dozens of e-mails, only Visible parts of each e-mail being date of receipt, sender and subject line.

As it happens with all of us - fate of an e-mail gets decided on 2 items of visible information. If sender name and subject line are not appealing enough - the e-mail may not get opened or in worst case, end up in trash folder no matter how good its content is.

E-mails having distinct business names as sender (as opposed to gmail, yahoo etc.) and displaying precise and specific subject lines stand up among multitude of e-mails and carry far more probability of being opened  and responded to.

Best part of business e-mail is that - its FREE !  You get business e-mail automatically when investing in a web-site. In fact, business e-mail is part of web-site - you can not separate one from the other.

Web-site and business e-mail creates the foundation for a trusted relationship building. Next step is to look at communication style – next week

Blog Author : Dr. Amit K Chatterjee        Tags : trust, b2b portals, business transaction, market place

Blog Sector : Foreign Trade

Blog Categories : Web Design / Graphics / SEO Services
Marketing / Promotion Services
Misc. Business / Financial Services


Date : March 25, 2010                          Number Of Views : 18825                     Comments : 3

Falling rate of growth in agricultural output is a serious concern for Indian policy
makers as agriculture sector employs around 60% of total workforce in India. It
contributes around 17% of GDP and is mainly responsible for less than desirable growth
rate in national GDP in spite of high growth rate in non agriculture sector. Most optimistic
official estimate for agricultural growth is 4% during 11th Five Year Plan (2007-12). Mid
Term review of 11th Five Year Plan, under the chairmanship of PM, held in March' 2010
has lowered India's targeted growth of 9 percent per annum.

There are many reasons for such poor health of Indian agriculture - over dependence
on monsoon, lack pf progress in irrigation, insufficient finance, inadequate marketing
of agricultural products etc.

Though many of these ills can be addressed through proper policy formulation, good
governance and investment - there's one systemic weakness that will continue to
stand between Indian agriculture and healthy growth rate - poor return from farm
investment because of lack of economy of scale.

Given land holding pattern of India where average farm size has been getting
smaller and smaller (from 2.27 Hectare in 1970-71 to 1.27 Hectare in 1995-96) -
realizing healthy return from farm investment is getting increasingly difficult,
forcing farmers to adopt new business (e.g. poultry, fishing etc.) or commit

While long term govt initiatives (not loan write-offs) can address many of these
issues - it will take long time to fructify, that is - if at fructifies at all.

Collective farming through co-operatives or contract farming can address many
of these issues immediately and put farm income at much better level besides
injecting production growth arising from economy of scale and better crop management.

UPA government’s Approach Paper to the 11th Plan gave priority to development
of contract  farming. A Working Group set up by the National Development Council,
under the then Chief Minister of Punjab Mr. Amarinder Singh, made several
proposals in this respect. The proposals include liberalising laws for crop
contracts, tax rebates for food processing, duty-free import of farm machinery,
exemption of market fees, etc., and liberalized imports of seed varieties for
contract farming programs.

Contract Farming

Contract farming is an agreement between farmer and buyers (mainly corporates)
for production and supply of agricultural or horticultural products under forward
contracts. Core of the agreement is a commitment of the farmer to supply an
agricultural commodity of a certain type, at a time and a price, and in the
quantity required by a known and committed buyer, typically a large company.
The buyer commits to buy the whole produce at agreed price, freeing the farmer
from vagaries of market.

The typical contract is one in which the contractor supplies all the material
inputs and technical advice required for cultivation, while the farmer supplies
land and labour.

Success Stories

Perhaps the most successful story of corporate India's foray in agriculture
has been scripted by Pepsico. Way back in 1989, Pepsi Foods Ltd (Pepsico)
installed a tomato processing plant in Hoshiarpur, Punjab. PepsiCo followed
a method whereby the cultivator plants the company’s crops on his land, and
the company provides selected inputs like seeds/saplings, agricultural
practices, and regular inspection of the crop and advisory services on crop

Success of Pepsico model inspired other corporates, notably Cadbury in cocoa,
Unilever in tomato, chicory, tea and milk, ITC in tobacco, wood trees and
oilseeds, Cargill in seeds etc. Among domestic corporates are Ballarpur
Industries, JK Papers and Wimco in eucalyptus and poplar trees, Green Agro Pack,
VST Natural Products, Global Green, Intergarden India, Kempscity Agro Exports
and Sterling Agro in gherkins, United Breweries in barley, Nijjer Agro in
tomato, Tarai Foods in vegetables, M Todd in mint etc.

Potato Farmers of West Bengal

West Bengal is the largest producer of potato in the country. Lack of cold storage
and food processing has always been the bane of Bengal potato farmers where bumper
production brings down potato price to fraction of actual cost incurring huge

Pepsico, the market leader in potato chips, require regular supply of quality potato
for its three manufacturing units – one each in Punjab, Pune and Bengal.

Pepsico entered into a contract farming agreement with about 6,500 farmers in West Bengal, covering a total acreage of 2,250 acres. Today, West Bengal is the largest supplier of potatoes for the chips manufacturer, enabling the company to procure 22,000 tonne of potatoes during 2010 by way of its contract farming agreement with farmers in the State. Pepsico is targeting 37,000 tonne in 2010-11 by increasing the productivity of the crop and bringing more number of farmers into a similar arrangement with the company.

According to company sources, Pepsico plans to rope in additional 5,000 farmers in
2010-11 and take the total number to about 11,500 and bring about 3,700 acres of
land under the agreement

For the farmers it is a win-win situation, particularly during periods such as this
year when potato prices have crashed following a bumper crop. “We are being offered
Rs 6 a kg for these special quality potatoes by the company against Rs 1-1.5 a kg for
the normal varieties such as Chandramukhi, Pokhraj and Jyoti. We stand to gain about
Rs 20,000 an acre,” said Mr Madhusudan Mondal, a farmer who has entered into an
agreement with the company.

PepsiCo currently procures potato from Punjab, Pune, Uttar Pradesh, Gujarat, Mahrashtra, Karnataka and Bihar for its various manufacturing facilities in the country. It is now in talks with farmers in Chhattisgarh for procurement of potatoes.

Blog Author : Dr. Amit K Chatterjee        Tags : contract farming, indian agriculture, potato farming, corporate agriculture

Comments for this blog : 3        Blog Sector : Agriculture

Blog Categories : Fruits and Vegetable - Fresh
Agricultural Commodities


Date : January 20, 2010                          Number Of Views : 53498                     Comments : 0

Export is considered a high-risk high-return business by many. Transacting business with an overseas partner thousands of miles away is a daunting factor for many. As a result, majority of SMEs are happy to supply locally and stay away from export.

SMEs in India contribute 40% to the total exports directly and a significant amount of exports indirectly through large trading houses or third parties. However, in spite of their sizeable contribution to exports, less than 0.5% of SMEs are actually engaged in exports. 

Whar Are The Perceived Risk Factors  ?

Assurance of timely payment and lack of risk mitigating avenues are considered major factors for such reluctance. The issue was studied in detail under the project ‘Strategies and Preparedness for Trade and Globalisation in India’, a ministry of commerce, Unctad and DFID initiative. The study suggested that SMEs may take the following steps to manage their payment risks and take remedial measures if bad debt does occur.

Know Your Buyer

The first step in the management of export payment risk is to get a credit rating report of your buyer. There are many agencies in India that provide credit rating reports on companies internationally. There are also companies which specialise on specific countries. Further, an SME can also approach its bank to secure a report on the buyer through its banking channels. Similarly, insurance companies help their customers getting credit reports.

However, a credit rating report can not guarantee against payment default and at best is an added comfort. Moreover, credit report report on companies outside USA and Europe are not always available or are as reliable.

Typically, a credit rating report costs $ 100 to $ 150. Delivery time is usually 7-10 days, faster the delivery, higher is the cost. Dun and Bradstreet, Mira Inform are some of the agencies SMEs can approach.

Credit Insurance

The next step is getting insurance for exports. In simple terms, the purpose of export credit insurance is to insure against the payment default. ‘Trade credit insurance’ or ‘credit insurance’ is an insurance policy and a risk management product offered by export credit agencies (ECAs) to business entities wishing to protect their balance sheet asset accounts receivable from loss due to credit risks such as protracted default, insolvency andbankruptcy.

The export credit insurance market in India is dominated by Export Credit Guarantee Corporation (ECGC). Having been a monopoly until recently, it is believed to have 80-90% marketshare. After deregulation of the insurance sector, all three biggest global credit insurance companies—Euler Hermes, Atradius and Coface—have consolidated their presence in India as re-insurers. Major players in the credit insurance market in India include ECGC, Bajaj Allianz, ICICI Lombard, Iffco-Tokio, New India Assurance and Tata AIG. The insurance cost varies from policy to policy and tend to cost between 0.3% and 1.0% of annual turnover, depending on previous bad debt history and current debt management practices.

Indian SMEs should take a note that most of the credit insuring companies in India do not cover risks such as commercial disputes; causes inherent in the nature of goods; buyer’s failure to obtain import licence; insolvency/default of agents like banks (other than the stock holding agent); risks covered by other general insurers like transit loss; exchange rate fluctuations for short term; failure of exporter to fulfil terms of contract, etc.

Debt Collection

In spite of best precautions - bad debt is an eventuality for which businesses need to prepare for. In such situations, professional assistance from debt collection agencies (DCAs) could be considered. Most collection agencies operate as agents of creditors and collect debts for a fee or percentage of the total amount owed. Some agencies, often referred to as ‘debt buyers’, purchase debts from creditors for a fraction of the debt’s value and pursue the debtor for the full balance.

Debt collection agencies in India have struck alliances across the world. When an SME approaches an agency for debt collection and provides details of bad debts, the agency quotes its success commission against recovery. The collection agency makes money only if it is collected from the debtor (often known as a ‘no collection, no fee’ basis). The agency takes a percentage of the debt that is successfully collected, sometimes known in the industry as the ‘pot fee’, or potential fee, upon successful collection. This does not necessarily have to be upon collection of the full balance and very often this fee is paid by the creditor if they cancel collection efforts before the debt is collected.

A contingent fee structure (‘no collection, no fee’) is pretty much the standard for collections around the world. Depending on the type of debt, the fee ranges from 10% to 50% (though more typically. the fee is 15-35%) plus the advanced upfront cost that is adjusted towards success fee. In case of litigation, the fee would go higher. Some agencies offer a flat fee, called ‘pre-collection’ or ‘soft collection’ service. Historically, fee is based on the size of the account, the amount collected and the type of handling (whether in-house or through a lawyer or lawsuit). However, other factors that may be used to set rates include the age of the account at placement, location of the debtor, strength of the case.

There are agencies operating in India as well as country-expertise agencies. The study suggested that SMEs should be careful when choosing debt collection agencies and should take into account the firm’s reputation, its customer base (one should select an agency that specialises in collecting from the category of customer the SME serves); size (an agency too big might not accord enough attention to small debts and a very small one might not be worth risking the collection if the amount is big); and its legal and financial position.

One should check as to how the agency proposes to pay the money once it is collected. An agency that maintains ‘trust accounts’ should be preferred. A trust account is a separate account where money from collections is held until remitted to the SME.

The study, published by FISME in a handbook form, enlists nine India-based buyer credit report providers and 21 country-specific ones. It also provides contact details of 13 debt collection agencies (operating in India) and around 400 agencies operating globally.

Blog Author : Dr. Amit K Chatterjee        Tags : export credit, risk mitigation, bad debt collection, credit rating

Blog Sector :

Blog Categories : Financial Services / Banking / Insurance


Date : December 29, 2009                          Number Of Views : 13397                     Comments : 0

Supply chain management is a key success factor in organized retail. For competitive price - retailers need to buy directly from producers, avoiding middleman commissions. Worldwide, retailers tie-up with producers for bulk purchase of manufactured goods and agro commodities.

Given land holding pattern of India where average farm size has been getting smaller and smaller (from 2.27 Hectare in 1970-71 to 1.27 Hectare in 1995-96) - sourcing large agro commodities from producers is truly a nightmare for any supply chain management system.

Contract farming was thought to be a logical solution. However, there is a plethora of issues on land ceiling act, lack of homogenous land use etc. that any corporate desirous of setting up contract form has to overcome. As a result, contract farming in India has been dominated by very large corporates who need regular supply of agro commodities for their own production. Examples are Cadbury in cocoa, PepsiCo in potato, chillies and groundnut, Unilever in tomato, chicory, tea and milk, ITC in tobacco, wood trees and oilseeds, and Cargill in seeds. Among domestic corporates are Ballarpur Industries, JK Papers and Wimco in eucalyptus and poplar trees, Green Agro Pack, VST Natural Products, Global Green, Intergarden India, Kempscity Agro Exports and Sterling Agro in gherkins, United Breweries in barley, Nijjer Agro in tomato, Tarai Foods in vegetables, M Todd in mint etc.

Clearly, no retailer would like to get into contract farming, which in any case, is not among their core areas. Given such supply constraint - retailers are moving to co-operatives in increasing numbers for better supply chain management. The buyers list includes ITC's e-choupal, Reliance Fresh, Heritage Foods and many more are the in the process to join the co-operative movement.

Reason is obvious as the co-operatives are registered under the mutually-aided co-operative society Act. For instance, as pilot, the Federation of Farmers' Association (FFA) of Andhra Pradesh has initiated a move by setting up eight co-operatives in the state for mango which has helped in mitigating losses to an extent of Rs 2-3 crore. According to Mr. Chengal Reddy, chairman, FFA - about 4,000 farmers in over 1,40,000 acres are working across eight co-operatives in Chitoor for mango production. This is being sourced by Coca-Cola to an extent of 3,500 tonnes of mango. Owing to the increasing demand, we are planning to increase it to over 12 co-operatives by this year end.

Interestingly, FFA has forged relationships with ITC in Medak district in Andhra Pradesh for sourcing vegetables on about 200-300 acres with over 700 growers and is in talks with Heritage Foods for supplying over one lakh bags of Sona Masoori rice. On the same lines, a co-operative movement is already in place for dairy products in association with National Dairy Development Board (NDDB).

Blog Author : Dr. Amit K Chatterjee        Tags : retailers, retail chain, indian retail, retail supply chanin management,

Blog Sector : Agriculture

Blog Categories : Retailer / Retail Products / Retailing
Fruits and Vegetable - Fresh


Date : December 23, 2009                          Number Of Views : 8094                     Comments : 0

Riding a rising consumption growth – steel prices are set to soar during 2010. Though recession and ensuing economic slowdown considerably dented consumption growth during 2008-09 its unlikely to influence demand-supply gap significantly in coming years. After reaching the highest point during July-August 2008, steel prices declined by more than 50-60% in the aftermath of the global recession. Since then, prices are on a strong upward ride with prices in the international market also firming up. For example, prices of hot rolled coil (HR) which, in the fourth quarter of 2008-09, were ruling at about 29,500 per MT, are currently at around Rs 32,000-35,000 per MT. That’s about an 18% increase. Its highly likely that high prices will persist, given that HR coils are used primarily in the automobile industry.

Steel Production : India is the 5th largest steel producer in the world, producing 55 MT  steel that accounts for 7% of total global production. Steel production in India has increased by a compounded annual growth rate (CAGR) of 10.03 per cent over the period 2001-02 to 2006-07. During the same period – CAGR of world steel production was 8.3%.

The National Steel Policy has a target for taking steel production up to 110 MT by 2019–20. With the current rate of ongoing greenfield and brownfield projects, the Ministry of Steel has projected India's steel capacity is expected to touch 124.06 MT by 2011–12.

Thanks to establishment of new state-of-the-art steel mills, acquisition of global scale capacities by steel makers, continuous modernisation and upgradation of older plants and backward integration into global raw material sources - India today occupies a central position on the global steel map. However, is it enough to quench ever rising thirst for more steel from India’s rapidly growing real estate, consumer goods and infrastructure sectors ?

Consumption Growth : In the midst of recession and economic slowdown – India consumed 26.49 MT of steel during April – September’ 2009, a growth of 5.7% over same period last year on account of improved demand from sectors like automobile and consumer durables. Today, Indian steel consumption accounts for about 5% of global consumption.

A Credit Suisse Group study states that India's steel consumption will continue to grow by 16 per cent annually till 2012, fuelled by demand for construction projects worth US$ 1 trillion. Given the low per-capita steel consumption figure of 35 Kg against 150 kg across the world and 250 kg in China – its only logical that steel consumption will rise rapidly in coming years.

Steel players like JSW Steel and Essar Steel are increasing their focus on opening up more retail outlets pan India with growth in domestic demand. JSW Steel currently has 50 such steel retail outlets called JSW Shoppe and is planning to increase it to 200 by March 2010. They expect at least 10-15 per cent of their total production to be sold by their retail outlets.

Essar Steel which currently has over 300 retail outlets across the country, plans to set up 5,000 outlets of various formats soon. It expects to sell 3MT of steel through the retail route in two years.

Demand Supply Mismatch :  While demand growth has been robust, supply of steel has been tight in recent years. Structural issues like delay in capacity augmentation, land acquisition difficulties for new steel projects and other impediments such as floods in Australia and Indonesia, snowstorms in China and floods in Jharkhand and Orissa have played significant role in moderating supply level.

Import has been brisk - according to American Iron and Steel Institute (AISI), India imported 52,000 MT of steel during October’ 2009, a growth of  32% over previous month.

However, during the same period United States imported a total of 1,560,000 MT of steel including 1,177,000 MT of finished steel, bringing imports for the two materials up by 29% and 15% Month on Month  respectively. This was the highest monthly total import figure since February.

With recession ending and global economy picking up– imports are rising, firming up steel prices globally.

Rising Input Cost:  A major reason for increase in steel price is the cost-push effect of higher raw material prices. Contract prices of coking coal and iron ore are set to rise. Prices of iron ore contracts, which are due to be renegotiated early next year, are expected to be finalised at higher levels of anywhere between 10% and 25% over those of 2008-09. Iron ore contract prices in 2008-09 were sealed at $75 a MT, while coking coal prices were sealed at around $300 per MT. While in the current year, long-term coking coal prices have fallen to $128 per MT, in the spot market, prices are ruling slightly higher.

Expect Steel Prices to Rise in 2010 :    December can easily pass off as a watershed month for long product prices. The thrust of about 9% in the last 4 days (Dec 19-22)  has amazed all. Although the reason apparently is  a Govt crackdown on illegal mining resulting in shortage of iron ore and sponge iron and a speculative one at that – it may as well be harbinger of price trend in new year. 

Blog Author : Dr. Amit K Chatterjee        Tags : steel price, global steel price, iron and steel, market trend, steel industry analysis

Blog Sector : Industry Analysis

Blog Categories : Steel, Finished Products – Angles, Fittings, Bends
Iron Ore and Industrial Iron Products
Steel, Primary - Plates, Billets, Ingots


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