Early mortality syndrome, which attacked Thailand’s shrimp industry in 2012, opened doors to opportunities for Indian shrimp exporters. And they capitalised on it. Today, India is the world’s largest exporter of frozen shrimps and prawns, and its share in world exports is growing like never before!
Neha Dewan | January 2017 Issue | The Dollar Business
If you are getting ready to relish a shrimp dish for dinner tonight - wherever you may be - chances are very high that the shrimps have been originally farmed, sourced and processed in India! As the world’s leading exporter of frozen shrimps and prawns, India has for a long time been the preferred choice for importers across the globe, particularly from US, Japan and Vietnam, among others. Having said that, with various regulatory measures playing spoilsport, the year 2016 has been somewhat mixed for its exporters in India.
Earlier in March 2016, US had hiked the anti-dumping duty on frozen shrimps entering its market – for India the duty increased from 2.96% to 4.98%. This was expected to have a direct bearing on India’s exporters as US is the largest market for Indian shrimps. However, the duty was soon rolled back in September, a move that calmed the nerves of many exporters who depend on the US market.
Other than the unpleasant experience with US, the exports business of shrimp has shown a steady performance over the last few years. India’s exports of frozen shrimps (of the variety that is most exported by India, HS Code: 03061790) has gone up from $1.01 billion in FY2014 to $1.22 billion in FY2015 and then to $2.40 billion in FY2016 – a growth of almost 97% from the previous year and over 136% from FY2014 (Ministry of Commerce, GoI, data). Exports of scampi (a variety of prawn), however, fell from $2.37 billion in FY2015 to $0.56 billion in FY2016, bringing down the overall export number across the shrimps and prawn category.
Data also shows that US, Vietnam and Japan have been the top markets for Indian frozen shrimp and prawn exporters for the last few years. And the last financial year was no exception. In FY2016, US clearly lead the pack, importing shrimps and prawns worth $998.82 million from India, followed by Vietnam and Japan that sourced shrimps and prawns worth $361.92 million and $279.61 million respectively from Indian suppliers. So what is it that makes India a preferred sourcing hub for decapod crustaceans?
Jiju Pillai, Director of Forstar Frozen Foods, a Mumbai-based exporter of frozen shrimps, says, “The reason for the increase in shrimp exports is the introduction of ‘vannamei’ shrimps in India’s export basket, which are in high demand globally. A conservative export estimate by Marine Products Exports Development Authority (MPEDA) suggests that India produces about four lakh metric tonne of vannamei every year. The production is at par with that of Thailand, which has traditionally been the leader when it comes to vannamei.”
Further, as per experts, the demand for frozen Indian shrimp in overseas markets has also increased significantly due to the excellent quality of the product, and on the back of the assurance that a regular supply of the product can be made from India to these markets.
All in one Basket?
India’s status as shrimp exporter has grown significantly over the years, and is today the world’s largest supplier of frozen shrimps. What’s more? In the recent times, the country has also emerged as the largest exporter of shrimps to the world’s biggest market US – especially, after the early mortality syndrome (EMS) disease hit Thailand’s shrimp production in 2012. In fact, as of today, nearly 40% of the shrimp exported from India lands in US. But then, isn’t over-dependence on a single big market a cause of concern for Indian shrimp exporters? Really, should you put all your eggs in one big, foreign basket?
V. Padmanabham, National President, Seafood Exporters Association of India (SEAI), explains, “Dependence on any market is related to the consumption and demand in that market. US is a very important market, but then there are other markets that also require Indian shrimps and the supply to those markets has been increasing with every passing year. For instance, China’s demand has gone up substantially in the current year and so has India’s exports to China.”
Pillai of Forstar Frozen adds that focusing on a single market has its share of risks which his company tries to avoid. “Andhra Pradesh based companies are exporting 80-100% of their production to US, which is very risky. As for us, we have taken a decision to expand our markets. So even if one market suffers, we don’t end up risking too much,” says Pillai.
The picture is now clear that despite growth, the scene isn’t all that glittery! This year, in addition to US imposing anti-dumping duty on frozen shrimps, EU has tightened the norms for inspection of aquaculture products from India. Interestingly, EU is the 3rd largest market for Indian shrimps and prawns, in terms of value, accounting for 18.79% of India’s total exports of the product. So, with the scene changing, exporters are keeping a keen eye for alternate markets.
“Thanks to a rise in purchasing power, China is slowly turning out to be a lucrative market for Indian shrimp exporters,” shares Pillai. In addition, Padmanabham says, “Alternate markets, such as US, Japan, China, Russia, South Africa and other far-east and middle east countries have always been there, which can absorb volumes, and there is a demand in those markets that we can fulfil.”
This trade is definitely not an easy one. It is capital intensive and has stringent quality requirements. And adding to that are the high costs of power and water needed for processing. What keeps exporters going is the volumes and the will to do better. While the margin is on the lower side, the industry relies on a high-volume game. “We usually work on a 5% profit margin. However, we do have government support such as 5% incentive under MEIS, and an interest subvention scheme of 2%,” adds Pillai.
Shrimps being processed and readied for exports at a processing facility near Mumbai.
Shrimp and prawn exports account for over 65% of marine exports from India.
Exports of frozen shrimps and prawns contribute significantly to India’s forex earnings. However, there is a need for constant value-addition to stay ahead of the curve in the face of competition. Setting up of Specific Pathogen Free (SPF) Brood Stock multiplication centres, will go a long way in reducing costs to the farmer and increasing profitabilities.
Increased power supply and dredging of creeks in coastal areas are important infrastructure requirements that will boost trade for shrimp exporters. Policymakers also need to look at the high power tariffs. Price uncertainties that lead to additional cost of storage, shipment delays and the absence of quality control at production centres are also causes for concern. Despite these challenges, Indian exporters of frozen shrimps are excited about the year ahead. Reason? The world just loves Indian shrimps!
Jiju Pillai Director, Forstar Frozen Foods Pvt. Ltd.
TDB: EU has tightened norms for inspection of aquaculture products sourced from India. How has your experience been in dealing with EU?
Jiju Pillai (JP): EU has tightened norms because it wants to control the usage of antibiotics. Marine Products Exports Development Authority (MPEDA) has brought out a series of initiatives, including study classes, which have drastically reduced the cases of antibiotic usage.
Again, EU being a bloc of many countries, one must understand that each individual country has a series of compliance to follow. Every country has a packaging formula, labelling and quality demand, hence, we have to process each order differently. So, every export shipment is a learning experience for us.
In our case, serving Japanese market was one of the toughest, as the quality standards are very stringent there. Having exported to Japan, serving EU markets has become easier. Japan has high quality requirements and their working style is different. They will come and teach you and after that it becomes your responsibility to deliver. If you don’t adhere to their requirements, they might accept the consignment once or twice. But beyond that, the business is gone. And losing a contract from a Japanese client is not considered good.
TDB: What are the major challenges you face in exporting frozen shrimps? How are the associations pitching in to resolve these challenges?
JP: MPEDA is working on educating farmers and exporters on the requirements. Besides MPEDA, there are associations such as Seafood Exporters Association, which are taking up various steps to boost exports of seafood from the country. Having said that, there are various challenges at different stages, and one such pertinent case is that of electricity tariffs. Food, especially, seafood, being a perishable item, if we don’t get power round-the-clock, we have to run our generator sets and keep the production on, which is three times costlier.
Our concern about tariffs was misinterpreted, but after two and a half years, we have received a favourable response.
TDB: US shrimp imports from India increased by over 40% y-o-y in August. Are we too dependent on US?
JP: If we are depending on one country, it is bad for the category as well as the country. Traditionally, a lot of Andhra Pradesh-based companies are dependent to the extent of 80-100% on exports to US, which is very risky.
About 7-8 years ago when I was analysing my company’s shipments, I found that we were shipping about 90% of our produce to EU, and realised that this was a big risk. That was when we started exploring new markets, so that even if one market suffers we don’t end up risking too much.
TDB: Who are our competitors? Does India has an edge over them?
JP: US, EU, Japan and even China, are big markets for Indian shrimps, while Indonesia and Taiwan are our top competitors. However, Vietnam and Bangladesh also have a good production of Black Tiger shrimps and they are huge exporters to EU. Indian quality is really good and we do have an edge.
However, the price varies because even within our country there is a variation between East and West coast pricing. I would say, we are fortunate that Indonesia is a huge producer of only the smaller size shrimps while India exports more of the bigger size.
TDB: What aspects of our aquaculture do you think need improvement?
JP: We must improve the cultivation pattern in the east coast. Farms in the west coast are better organised and farmers are aware of the productivity standards, breeding size and patterns. The farms in the west coast harvest two crops a year, and with proximity to the sea the shrimps taste better and the water availability concerns are less. Whereas, in the east coast, traditionally, paddy fields are converted into farms, which leads to many problems. Farmers are not organised there and they cultivate three crops a year, which ruins the yield. East coast farmers focus on harvesting smaller size shrimps while west coast focus on harvesting larger size or full-sized shrimps.
TDB: What would be your suggestions to an entrepreneur who wants to enter this business?
JP: This industry is highly capital intensive! When we started, we spent close to Rs.65 crore. But since we already had a client, we recovered our capital fast.
Today, the competition is huge and there are many knowledge areas that an entrepreneur must be aware of, such as, information regarding brand-image, developing innovative products to get new markets, etc. Also, the margin is low.
TDB: What are some of the infrastructure challenges shrimp exporters face?
JP: We procure mainly from around the Gujarat border, and it takes shrimps only 3-4 hours to reach our factory in Taloja, Navi Mumbai. We have had issues with price tariffs, but it is getting sorted. So, there isn’t any major issue.
Having said that, high costs of power and water are major concerns. In addition, water for processing seafood needs to be treated through multiple processes. We need all kinds of water treatment such as radiation, filtration, chlorination, UV and RO treatment. I think that the efficiency of the common effluent treatment plants needs improvement
“Exports Target Of Seafood for FY2020 is $10 Billion”
V. Padmanabham National President, Seafood Exporters Association of India (SEAI)
TDB: Are Indian frozen shrimp exporters looking at alternative markets after European Union (EU) tightened norms for inspection of aquaculture products sourced from India?
V. Padmanabham (VP): EU has tightened norms despite rejections on antibiotic residue detentions coming down to one in the current year and three in the last year, as compared to 12 in 2014. EEC (European Economic Community) is an important market, and it needs to be retained. Alternate markets such as US, Japan, China, Russia, South Africa and other far-east and middle-east countries have always been there, and these markets can absorb volumes.
TDB: What steps is SEAI taking to help exporters adhere to stringent norms?
VP: There seems to be some information gap between authorities in EU and India. There is a need for systemic improvement, and the Commerce Ministry, GoI, is addressing the issue. Antibiotic residue issues, at the source level and at farms and hatcheries, are now being addressed in a systematic and sustained manner by government agencies as well as exporters. This has resulted in detentions, on account of antibiotic residues, almost coming down to single-digit figure in all importing countries. Looking at the fact that thousands of containers are shipped out on a regular basis, this is commendable.
TDB: How has India’s shrimp exports industry performed so far in FY2017?
VP: The total export of marine products from India for April-September 2016 period has gone up 15% y-o-y, by value. While shrimp exports has gone up by about 10% in volume terms, its exports has increased 18% y-o-y in rupee terms and 14% y-o-y in dollar terms during the first half of FY2017.
TDB: Now that US has rolled back the hike on anti-dumping duty on Indian shrimps, what changes do you expect in the export pattern?
VP: Despite the roll-back, anti-dumping duty is still applicable on shrimp imports from India, though at a lower rate. Having said that, farmers do stand to benefit from the duty reduction as the move could lead to increase in shrimp production and exports in the near future.
TDB: What is the outlook for India’s frozen shrimp exports?
VP: Exports of shrimp is expected to increase as more land is coming under shrimp aquaculture in Andhra Pradesh, Odisha, West Bengal and Gujarat. The marine products export target for FY2020 is $10 billion – 60-65% of this will be met by shrimp exports.
TDB: How can India improve its aquaculture industry and boost exports?
VP: The demand for frozen Indian shrimp in US and other overseas markets has increased significantly over the last few years due to the excellent quality of the product, and also on the assurance that a regular supply of the product can be made from India to these markets. To consolidate its position, India now needs to focus on exports of value-added aquaculture products. In fact, huge investments in equipment have already been made by many exporters to move up the value chain. The productivity of labour too needs to be improved. Our policy for encouraging export of value-added products also needs to be reviewed objectively.
TDB: Who are our main competitors?
VP: India’s main competitors are Vietnam, Indonesia, Thailand, Ecuador and Bangladesh to an extent. Cost of production in some of these countries is lower than India, which gives them an edge.
TDB: What would you suggest to those who want to enter this business?
VP: A new entrant in this segment could look for opportunities in the resource sector, as opportunities in processing and export are getting saturated. Setting up of shrimp broodstock multiplication centres, as well as artemia and polychaete culture and intensive shrimp farming with advanced techniques, offer good opportunities to entrepreneurs.
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