India: Effects of Tariffs and Nontariff Measures on U.S. ... - USITC

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Food Processing <strong>and</strong> Nonalcoholic Beverages <strong>India</strong>’s government has a strong interest in reducing wasted food through increased development <strong>of</strong> the food processing industry. Toward this goal, <strong>India</strong>n government regulations permit FDI in food processing with no industrial license required, except for alcoholic beverages <strong>and</strong> products reserved for small-scale industries (SSI). 13 Observers expect processed food to grow rapidly as a share <strong>of</strong> all perishable food, moving from TABLE 8.4 <strong>India</strong>: U.S. majority acquisitions <strong>of</strong> <strong>India</strong>n food companies, 2003–08 Final equity Acquirer Target stake (percent) Deal value (million $) Date announced Industry Bunge Ltd. Hindustan Lever Ltd.’s edible oils <strong>and</strong> fats business 100 0.2 June 20, 2003 Refining <strong>and</strong> blending <strong>of</strong> fats <strong>and</strong> oils Gabriel Management Group Wm. Wrigley Jr. Company Bonsai Garden (<strong>India</strong>) Pvt. Ltd. Joyco <strong>India</strong> Pvt. Ltd. 100 NA December 17, 2003 Soil preparation, planting, <strong>and</strong> cultivating 100 264.5 January 8, 2004 Confectionery Schreiber Foods Inc. Dynamix Dairy Industries Ltd. 51 37.5 February 24, 2004 Dairy products Mr. <strong>and</strong> Mrs. Epparala Delta <strong>and</strong> Pine L<strong>and</strong> Company The Hershey Company KICM (Madras) Ltd. Vikki’s Agrotech Pvt. Ltd. Godrej Beverages <strong>and</strong> Foods Ltd. 100 NA June 19, 2004 Mushroom processing 100 NA January 22, 2006 Cotton seeds 51 55.0 April 3, 2007 Confectionery Anheuser-Busch Crown Beers 100 NA June 20, 2008 Breweries International <strong>India</strong> Ltd. Source: Bureau van Dijk, Zephyr M&A database, June 25, 2009. approximately 3 percent in 2006 to 6 percent in 2009 <strong>and</strong> continuing to grow at a compound annual growth rate <strong>of</strong> 12 percent in coming years. 14 Further FDI in food processing will be essential to increasing <strong>India</strong>’s food processing capacity. Factors contributing to the increased dem<strong>and</strong> for processed <strong>and</strong> packaged foods include the gradual expansion <strong>of</strong> organized retail outlets, more double-income families, <strong>and</strong> the decreasing cost <strong>of</strong> processed foods. 15 U.S. companies have noted this trend <strong>and</strong> have begun to take an active role in <strong>India</strong>’s processed food industry (box 8.1). 13 As <strong>of</strong> 2008, the remaining foods reserved for SSI were pickles <strong>and</strong> chutneys; bread; pastry; hard-boiled sugar c<strong>and</strong>y; rapeseed, mustard, sesame, <strong>and</strong> groundnut oil; <strong>and</strong> ground <strong>and</strong> processed spices. L<strong>and</strong>es, The Environment for Agricultural <strong>and</strong> Agribusiness Investment in <strong>India</strong>, July 2008, 16–17. 14 Industry representative, interview by Commission staff, Mumbai, <strong>India</strong>, May 29, 2009; Investment Commission <strong>of</strong> <strong>India</strong> Web site, “Food & Agro Products.” 15 Investment Commission <strong>of</strong> <strong>India</strong> Web site, “Food & Agro Products.” 8-6
BOX 8.1 FDI in <strong>India</strong>’s Poultry Market Godrej Tyson Foods is a joint venture between Tyson Foods, Inc., a major U.S. poultry processor, <strong>and</strong> Godrej Agrovet. The venture, established in 2008, was aimed at convincing <strong>India</strong>n consumers to purchase chicken as most Americans do—in chilled bags <strong>of</strong> whole chickens or tray packs <strong>of</strong> chicken parts readily available in a retail shop. This is a significant change for <strong>India</strong>n consumers, who typically purchase live chickens that are slaughtered to order. The company emphasizes the convenience <strong>and</strong> food safety advantages <strong>of</strong> refrigerated chicken for <strong>India</strong>’s growing population <strong>of</strong> consumers with disposable income. Nonetheless, Godrej Tyson’s market is limited because many rural areas do not have sufficient access to the electric power required for refrigeration <strong>and</strong> because retailers are required to store vegetarian <strong>and</strong> nonvegetarian food separately, creating competition for retailers’ limited refrigerated storage space. For retail customers, Godrej Tyson sells processed chicken under the Real Good br<strong>and</strong> <strong>and</strong> ready-to-eat frozen foods, such as chicken sausages <strong>and</strong> vegetarian patties, under the Yummiez br<strong>and</strong>. The joint venture also sells frozen food to the restaurant <strong>and</strong> hotel trade. These large customers generally require a health certification from their meat suppliers, which gives large companies such as Godrej Tyson an advantage. Godrej Tyson maintains complete control <strong>of</strong> its cold chain distribution system from slaughterhouse to retail, including generating much <strong>of</strong> its own electricity, an essential investment for refrigeration capacity. Chickens are raised through a contract farming arrangement with local farmers, <strong>and</strong> Godrej Tyson supplies the feed <strong>and</strong> all other inputs. The company sells chicken through a controlled distribution system to 600–700 retail outlets. Godrej Real Good Chicken is sold with a three-day shelf life from the date <strong>of</strong> processing. One roadblock has been that most <strong>India</strong>n food retailers are not accustomed to the hygiene requirements necessary for selling fresh meats, <strong>and</strong> there have been problems with retailers turning <strong>of</strong>f the electric power to the refrigerators at night to save electricity costs, not underst<strong>and</strong>ing the bacterial risks. To combat this problem, Godrej Tyson has engaged in marketing efforts aimed at both consumers <strong>and</strong> retailers, <strong>and</strong> the company now refuses to credit retailers for any chicken that shows signs <strong>of</strong> nonrefrigerated storage. Godrej Agrovet introduced chilled tray-pack chicken under the Real Good Chicken br<strong>and</strong> before partnering with Tyson, but Tyson brings several highly useful attributes to the joint venture, including new technology <strong>and</strong> operating procedures that can exp<strong>and</strong> the retail shelf life <strong>of</strong> chilled chicken to 12 days by keeping bacteria counts low. Together, Godrej Agrovet <strong>and</strong> Tyson will invest millions <strong>of</strong> dollars to upgrade equipment in the venture’s chicken processing plants in Mumbai <strong>and</strong> Bangalore, establish additional cold chain distribution facilities, <strong>and</strong> increase marketing efforts aimed at consumers <strong>and</strong> retailers. Godrej Tyson has also invested in self-controlled electric power <strong>and</strong> water <strong>and</strong> wastewater treatment facilities. Godrej Tyson’s inputs come from local <strong>India</strong>n production rather than from imports. The company has imported equipment for its chicken processing line <strong>and</strong> some chicken vaccines, but chickens <strong>and</strong> chicken feed (primarily corn) are all sourced locally. Godrej Tyson exports small amounts <strong>of</strong> chicken from <strong>India</strong> to neighboring countries. Exports to larger markets in the Persian Gulf region, however, are currently prohibited because <strong>of</strong> the presence <strong>of</strong> avian influenza in <strong>India</strong>. Sources: Industry representatives, interviews by Commission staff, Mumbai, <strong>India</strong>, May 13 <strong>and</strong> 28, 2009; industry representative, telephone interview with Commission staff, April 7, 2009; fDi Markets database; <strong>and</strong> press reports. 8-7
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United States International Trade C
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U.S. International Trade Commission
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Abstract This report describes <str
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TABLE ES.1 India:
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U.S. agricultural products face str
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U.S. Foreign Direct Investment U.S.
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CONTENTS Page Abstract ............
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CONTENTS―Continued Chapter 6 <str
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CONTENTS―Continued Figures 1.1. <
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ACRONYMS AND TERMS AAY Antodaya Ann
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ACRONYMS AND TERMS—Continued RGGV
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TABLE 1.1 India: A
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FIGURE 1.1 India:
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India’s central
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Despite their weak economic pr<stro
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Approach Current India</str
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Bibliography Birner, Regina, Surupt
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World Bank. Agriculture for Develop
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FIGURE 2.1 India:
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TABLE 2.1 India: A
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FIGURE 2.3 India:
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premium); (2) India</strong
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include government export restricti
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TABLE 2.3 India: A
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FIGURE 2.6 India:
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Exports by Major Trading Partner <s
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CHAPTER 3 Domestic Consumption Over
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TABLE 3.2 India: P
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more likely to have been exposed to
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BOX 3.3 Indian Con
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TABLE 3.3 India: T
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are expected to see income growth <
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Food Preferences India</str
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Regional Variation Geographic <stro
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CCC. “Know India
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CHAPTER 4 Indian A
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For most crops, however, In
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The Farm Sector soybeans 29 —but
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Food processing in India</s
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BOX 4.1 The Central Government’s
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BOX 4.2 Does the Minimum Support Pr
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August 3, 2009, New Delhi announced
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known as zamindars, have doubled or
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that the PFA Act was strictly enfor
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———. Bharat Nirman: A Time-Bo
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Organisation for Economic Co-operat
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CHAPTER 5 TARIFFS Overview
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sensitive. They include vegetable f
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wholly milled rice and</str
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The Indian governm
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India also reporte
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Reference Prices Reference prices,
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Landing Fees <stro
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Simulated Effects
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and nuts” by $0.
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5-19 TABLE 5.4 India</stron
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Bibliography Acharya, Keya. “Thor
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Indian Express.com
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CHAPTER 6 Nontariff</strong
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Page 127 and 128: BOX 6.2 Wheat—Continued Yet, <str
Page 129 and 130: perpetuated continuously. The impor
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Page 139 and 140: TABLE 6.2 India: E
Page 141 and 142: Bibliography American Apparel <stro
Page 143 and 144: Mattson, Jeremy W., Won, W. Koo, <s
Page 145: ———. 2009 National Trade Esti
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Page 150 and 151: First Point of Sal
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Page 154 and 155: approximately 65 million households
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Page 164 and 165: found that 39 percent of</s
Page 166 and 167: Bibliography Banerjee, A. Dairying
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Page 172 and 173: TABLE 8.2 India: A
Page 176 and 177: There is not necessarily a strong l
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Page 180 and 181: BOX 8.3 Restrictions on Foreign Joi
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Page 184 and 185: commenced. States tend to be quick
Page 186 and 187: Bibliography Bahn, Niti, an
Page 188 and 189: International Center for Alcohol Po
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Page 192 and 193: BOX 9.1 The UPOV System for Plant V
Page 194 and 195: that the public sector in I
Page 196 and 197: Whether this situation will soon ch
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Page 200 and 201: eggplant, which began field trials
Page 202 and 203: Maskus, Keith E. “Intellectual Pr
Page 205: APPENDIX A REQUEST LETTER
Page 208 and 209: The Honorable Sham L. Arano
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Page 213: APPENDIX C HEARING WITNESSES
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Page 219 and 220: Summary of Views <
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to U.S. exports to India</s
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transparent sanitary regulations th
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hotel and catering
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Western Pistachio Association 26 In
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APPENDIX E POTENTIAL FOR U.S. AGRIC
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E-4 TABLE E.1 India</strong
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APPENDIX F INDIAN AGRICULTURAL PROD
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TABLE F.1 India: A
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FIGURE F.1 India:
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is in nonirrigated areas with yield
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Consumption India
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efrigeration. This characteristic i
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70 percent of tota
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eportedly preferred in southern <st
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Cotton During MY 2003/04-2007/08, <
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Government of <str
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APPENDIX G UNION AND STATE/UNION TE
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certain agricultural goods in the p
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Bibliography Chaulan, Shri U.K. “
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Simulation Framework The effects <s
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Producers determine the optimal sup
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Applied ad valorem tariff equivalen
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We considered the possibility that
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Estimation of <str
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Bibliography Anderson, Kym, Mariann
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