Voluntary Report - public distribution

**Date:** 2/20/2004

**GAIN Report Number:** IN4015

IN4015

**India**

**Agricultural Situation**

**Weekly Highlights & Hot Bites, #6**

**2004**

**Approved by:**

![](media/image1.wmf)Chad R. Russell

U.S. Embassy, FASNEWDELHI

**Prepared by:**

A. Govindan, Santosh Kr. Singh, Sayed Sarwer Hussain

**Report Highlights:**

\*Profits still elude food industry\*, \*India hits back with stringent
food laws\*, \*US seeks enhanced trade as India raises BPO issue\*,
\*India unlikely to have spare wheat for exports\*, \*Bangladesh:
Poultry Industry - No Bird Flu found yet, scare wrecks havoc\*.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

New Delhi \[IN1\]

\[IN\]

Welcome to Hot Bites from India, a weekly summary of issues of interest
to the U.S. agricultural community. The report includes information that
has been garnered during travel within India, reported in the local
media, or offered by host country officials and agricultural analysts.
Press articles are included in this report. Significant issues will be
expanded upon in subsequent reports from this office.

DISCLAIMER: Any press summary contained herein does NOT reflect USDA's,
the U.S. Embassy's, or any other U.S. Government agency's point of view
or official policy.

# PROFITS STILL ELUDE FOOD INDUSTRY

An updated McKinsey study reports that, even as the Indian food industry
is undergoing a gradual shift towards increased processing and value
addition, it is mired in low profitability. Although many companies have
entered the food processing industry in the past few years, few have
turned into larger businesses. Dairy and poultry companies show after
tax profit margins of less than 5 percent. Outlining the key constraints
to profitability of processed food companies, the report says these
range from high taxes on processed items, high import duties on
equipment, minimum support prices that prevent cost reduction in
sourcing of inputs, and the nascent state of contract farming in the
country. (Source: Business Standard 2/16/04)

# INDIA HITS BACK WITH STRINGENT FOOD LAWS

According to a recent article, the Indian government, reacting to the
continued rejection of its food consignments by the European Union and
the United States on grounds of sanitary and phytosanitary (SPS)
measures, has begun the process of putting in place stringent laws to
regulate imports of sub-standard products. The new Plant Quarantine
(Regulation of Import into India) Order, 2003, became effective on
January 1 this year. The domestic food industry is largely of the view
that regulations in the country should be strengthened to facilitate
upgrading and implementing of food safety standards. India should also
develop expertise to challenge any SPS norms being used on flimsy
grounds by the developed countries to check imports from the developing
world. (Source: Financial Express, 02/16/04)

*Post Comment*: New Indian import procedures have disrupted US exports
of dried fruits and nuts, particularly almonds which are valued at \$77
million annually. Disruptions to exports of other agricultural products
to India may also occur. Contrary to the WTO SPS Agreement, the new
measures were implemented without being properly notified to the WTO.

# US SEEKS ENHANCED TRADE AS INDIA RAISES BPO ISSUE

India has voiced its concerns over the backlash in the US on the issue
of business process outsourcing (BPO) even as it reiterated its
readiness to engage constructively with countries such as the US for
bringing the failed WTO trade talks back on track. "It is strange that
on the one hand people are talking about opening of markets, and on the
other hand banning BPO. Our agriculture is fragile as it is not
subsidized like in the US," Mr. Arun Jaitley, Indian Commerce Minister
said after his meeting with the United States Trade Representative
(USTR). In his meeting with USTR Zoellick, he also raised the issue of
recent anti-dumping investigations by the US on Indian shrimps. He also
flagged the issue of agriculture and its sensitivities for India, as a
large part of the Indian population is dependent on it. (Source:
Business Line, 02/17/04)

# 

# INDIA UNLIKELY TO HAVE SPARE WHEAT FOR EXPORTS

India may have little wheat to spare for foreign consumers, as domestic
demand is expected to match the bumper 76 million tons wheat crop this
year. Therefore, though the government has announced a new policy to
export foodgrain, there is little likelihood of enough surplus available
to justify an export subsidy. (Source: Economic Times, 02/18/04)

*Post Comments*: Please see 2004 India Grain & Feed Annual Report
(IN4014).

***BANGLADESH*: POULTRY INDUSTRY - NO BIRD FLU FOUND YET, SCARE WRECKS
HAVOC\
**\
Bangladesh is still free from bird flu, but a virtual consumer boycott
of chicken has pushed the local poultry industry to the verge of
collapse. In the last two weeks, chicken consumption in Bangladesh has
come down to about one-third of the normal level resulting in a drastic
price fall and huge losses to the broiler farmers and hatchery owners.
(Source: The Daily Star, 02/15/04)

**RECENT REPORTS SUBMITTED BY FAS/NEW DELHI**

  ----------- --------------------------------------- -------------------
  **REPORT    **SUBJECT**                             **DATE SUBMITTED**
  \#**                                                

  IN4013      Weekly Highlights & Hot Bites, #5       02/13/04

  IN4014      Grain & Feed Annual Report              02/20/04
  ----------- --------------------------------------- -------------------

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