Interview
Exploring new markets of South East Asian and African Countries: APS Manchanda, MD
Amar Singh Chawal Wala - Mfrs.& Exporters of Lal Qilla Basmati Rice. He share his views in an interview with Naveen Grover, Excerpts: Please tell us about overall scenario of global Basmati trade, India’s position in the international markets, and your own company’s status? Competitive prices of Indian Basmati Rice of 2011 crop helped to increase basmati exports to a level of 3.5 million tons. Indian Basmati qualities remained the most competitive against rice qualities produced in other countries which helped the Indian Basmati Rice to penetrate even in markets where basmati was hardly available like South East Asia and African countries. Although global market has become widened but industry margins have got shrunk due to excess production. We, Amar Singh Chawal Wala, also explored many new markets for basmati rice such as Mauritania, Djibouti, Kenya, Nigeria, Indonesia, Philippines and Malaysia etc. Recession in Europe is hurting Indian basmati exports, but at the same time, the demands at other international regions are high as well. Do you think due to this, this recession has negligible impact on Indian basmati exporters? Of course, recession in Europe had an effect on basmati rice exports and resulted in shifting of majority of demand from premium qualities to regular qualities of basmati. Another major impact came from the US market; a premium market for more than 100 thousand tons where technical barriers relating to pesticides residues have been created for Indian Basmati. Overall export is not highly affected as demand from other countries like Iran, Iraq and Yemen has much increased, resulting in hike in total Indian basmati rice exports. Gulf market is a major destination of Indian basmati. But now India is facing tough competition from Pakistan? What are your views on this? Middle East is a big market for Indian basmati rice but competition from Pakistan and surplus supplies from India resulted in shrinking margins in these countries. Weakening of Pakistani currency against US Dollar has also helped Pakistan to reduce their prices against Indian Basmati. Although the competition has become
tough yet customers prefer Indian Basmati, being better in quality and don’t mind paying premium.Government support by reducing taxation on basmati, sustainable and high-end quality can help India to maintain its edge in Middle East countries. Iraq has been a traditional buyer of India’s basmati, but according to a news story, recent US political pressure is forcing Iraqi importers to buy US long-grain rice instead of Indian basmati. Is it a matter of concern for Indian exporters, or do you think government should do something? Political pressure of US on Iraqi importers to buy US Long grain rice will have adverse effect on Indian Basmati export. Policy matters can restrict import of Indian Basmati in Iraq but it is difficult to change the taste of Iraqi consumers those who have tasted Indian Basmati in last few years. India Government should intervene in such matters as these are against regulations of WTO to keep the access of Indian Basmati in Iraq. Iran has been a major buyer of India’s basmati despite tough US sanctions. But it is facing payment issue. Does it affect the trade badly, or is there any relaxation in regard to payment issue? US sanctions have made it difficult for Iranian importers to import basmati from India which has created big difficulty for Indian exporters to trade with Iran. Big payments of Indian exporter are stuck up in Iran as a result of this. Iran, being one of the biggest importers of Indian basmati rice, any news results into deep effects to basmati trade in India. The recent arrangements of government for export of basmati to Iran in Rupee terms have helped to save this industry and farmerof the country. If we compare exports with domestic markets, we see that domestic markets are no less strong. In fact it is more lucrative. But due to lack of proper branding and distribution centres, the picture is not as great as it should be. What are your views, and would you expand in domestic markets in near future? The domestic market is becoming stronger every year with better realization to the
industry. Branded sales have resulted in many fold increase in basmati sales within India. Retail chains like Wal-Mart, Metro, Reliance, Big Bazar, etc. played a major role to widen the area of branded basmati with competitive price and easy access to the consumer. Knowing this fact, ASCW is equally focusing on the domestic market since beginning and targeting a double digit growth for Lal Qilla in India for coming two years. Modern retailing is emerging as a strong segment where the profit margins of retailers are high and low for rice traders. Despite this, rice traders are keen to sell basmati to retailers as the bulk of basmati consumers are high-end customers. Can you share your thoughts on this trend, and your experience with a retailer like Food Bazar, Spencer or Reliance Mart? To feed a country like India with a total population of more than 1.2 billion, modern retailing is playing a major role and any branded product needs to be placed at their outlets to obtain its market share. Although, manufacturer’s margins are low with modern retailing but reach of branded rice to the consumer is difficult without them. Our Lal Qilla is available in the majority of these outlets in the country and enjoys excellent relation with them. Most of the Basmati traders are entering value-added segments due to reasons like new generation’s preference of readyto eat food and snacks, and high profit margins. Do you have any plan to do the same? Concentrating more in the rice business, as there is a wide scope for further development, overall production of basmati is increasing in the country and simultaneously its market share is also growing in both domestic and export market. In the food segment, we are dealing in Lal Qilla Green Tea, Fried Onions, Soya Chunks and Soya Granules for the last few years and pursuing for the continuous growth of these products. Export of these products to many countries of the world is making Lal Qilla a household name. n
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