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