2. Creating Viable Export Agriculture Through Integrated Finance: Experience with Agri-Export Zones Presented By: Mukul Sarkar, Exim Bank Mumbai, March 16, 2007

3. 2 Exim India Presentation Structure  India’s 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.

4. 3 Exim India India’s Agri Exports: Potential  The size of the global food trade is about USD 650 bn.  Value of India’s agri exports is about USD 10 bn i.e. less than 1.50%.  India has one tenth of world’s arable land (size is more than China’s).  It has rich and diverse agro climatic zones with more than 50 major crops.  One fifth of world’s irrigated land.  2 nd largest producer of fruits and vegetables.  3 rd largest producer of agri commodities (largest in food grains).

5. 4 Exim India Agri Exports – India’s 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 for value 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.

6. 5 Exim India Agri Exports: What Constrains Us?  Low productivity due to inappropriate cultivation practices and improper 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. Inadequacy of domestic quality standards.  Not able to meet stringent SPS/Codex requirements of developed countries.  No clear focus on exports due to vast domestic market with low quality standards.

7. 6 Exim India AEZ: 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.

8. 7 Exim India AEZs in Various States StateNo. of AEZAgri Products Maharashtra8Grape, wine, mango, flowers, onions, pomegranate, banana & orange. Punjab3Vegetables, potatoes, Basmati rice. West Bengal6Pineapple, lychee, potatoes, mango, vegetables and tea. Karnataka4Gherkins, rose onion, flowers, vanilla. Uttar Pradesh4Potatoes, mangoes, vegetables, Basmati rice.

9. 8 Exim India AEZs in India…… StateNo. of AEZAgri Products Uttaranchal4Lychee, flowers, Basmati rice. AP5Mango pulp, vegetables, mango, gherkins, chilli MP4Potatoes, wheat, lentil, orange, seed. Other States22Coriander, cumin, Ginger, medicinal plant etc. Total60

10. 9 Exim India Gap Between Farmers and Exporters FarmersExporters Inputs Infrastructure Storage Transportation Technology Finance Quality Assurance Training

11. 10 Exim India Broken Agri Chain in India Production Poor extension Supply of inputs Low productivity Outdated farming practices Supply ChainProcessingMarketing High wastage Lack of storage Poor transportn. Many intermediaries No assured supply of inputs Lack of processing facility Technology Poor infrastructure Lack of grading No market linkages Broken chain increases credit risk and limits credit flow

12. 11 Exim India What 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

13. 12 Exim India What 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.

14. 13 Exim India Financing 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.

15. 14 Exim India Integrated 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 ProcessorsExporters/ Retailers Contract Farming Buyback Finance

16. 15 Exim India Advantages 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.

17. 16 Exim India PERFORMANCE 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 originally projected 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 of exports.  Products with no ready local market have a better chance of success.

18. 17 Exim India  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

19. 18 Exim India Established “for providing financial assistance to exporters and 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 country’s international trade…” ( Export-Import Bank of India Act, 1981) Objectives

20. 19 Exim India Range of Products & Services Pre- Shipment Export Marketing Export Production Export Product Development Import Finance Advisory Services Investment Abroad Post- Shipment Presence Across All Stages of Business Cycle INFORMATION Advisory Services Knowledge Building SUPPLEMENTS FINANCING PROGRAMMES Value Based Services

21. 20 Exim India  Customer-centric organisation  Inter-Office connectivity Organisation OFFICES

22. 21 Exim India Exim Bank’s 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.  Buyer’s Credit.  Supplier’s Credit.  Equity investments in overseas ventures.  Factoring through Global Trade Finance

23. 22 Exim India 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

24. 23 Exim India  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 Bank’s LOCs

25. 24 Exim India  Developing countries who lack forex can buy Indian goods 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 export contracts under one umbrella. Benefits of LOCs

26. 25 Exim India 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

27. 26 Exim India 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 VALUE ADDITION EXPORT M M I I T T R R O O P P EXIM BANK

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