Enhancing India’s Exports

Enhancing India’s Exports Reliance’s Experience - Focus Polymer Exports By Kamal P Nanavaty ETIG Knowledge Forum January 15th, 2004 Mumbai

Reliance : An Overview

Reliance - Businesses Textiles Polyester

Plastics & Polyester

Petroleum Products

Oil & Gas Infrastructure

Naroda Patalganga Hazira Jamnagar Suiting Shirting Furnishings Pillows Fabrics

PSF PFY POY P. Chips PTA PX LAB

LLDPE PP PVC MEG Ethylene Propylene VCM EO Ducts

LPG Gasoline Naphtha ATF Kerosene Diesel Petcoke Sulphur

Bombay High KG Basin Crude Oil Power Natural Gas Telecom

Materials and energy value chains and infrastructure

3

Reliance Financials 70000 60000

Rs. Crs.

Rs. Crs.

Turnover PAT

4500 4000 3500

50000

3000

40000

2500

30000

2000 1500

20000

1000 10000

500

0

0 98-99

99-00

00-01

01-02

02-03

Over 30% CARG in Turnover & PAT over the last 12 years 4

Reliance Key Facts ■

Gross turnover of Rs. 65,061 crs. ( US $ 13.7 billion)

■

Gross Profit of Rs. 9,366 crs. ( US $ 1.97 billion)

■

Net Profit of Rs. 4,104 crs. ( US $ 0.864 billion)

■

Compounded annual net profit growth over 5 years ~ 19%

5

Reliance in Numbers ■

5% of India’s total exports

■

30% of the total profits of the private sector in India

■

10% of the Govt.’s indirect tax revenues

■

5th largest single location oil refinery in the world

■

2nd largest producer of polyester fibre & yarn in the world

■

3rd largest producer of paraxylene (PX) in the world 6

Reliance - Product Flow Products exported : • Oil Products • Diesel, Gasoline, ATF, Naphtha • TAME, VGO, Petcoke • Polyester • POY, PSF, PTY, PET Chips • Intermediates • PTA, PX, MEG, DEG, TEG • Polymers • PP, PE • Chemicals • OX, LAB, Benzene • Textiles

7

Enhancing India’s Exports’

Reliance Exports so far… Rs. Crs.

14,000 12,000

11,200

11,510

'01-02

'02-03

9,370

10,000 8,000 6,000 4,000 2,000 0 98-99

99-00

00-01

Reliance’s exports are ~ 5% of India’s exports 170 times increase in the quantum of exports in the last decade

9

India’s Top Exporters (2002 – 03) Company

Exports (Rs. Crs.)

1. Reliance Industries

11510

2. TCS

4545

3. Infosys

3376

4. Wipro

2882

5. Videsh Sanchar Nigam

2847

6. Indian Oil Corp.

2626

7. MMTC

2294

8. BHEL

1923

9. Ranbaxy

1902

10. MRPL

1875

Source : ETIG, Company Annual Reports & websites

10

Reliance’s Export Market

8 overseas sales offices Exports to over 100 countries

11

Focus : Polymer Exports •PE’s •PP •PVC •PS

Inter Regional Polymer Trade Flows Global Trade : 35 MMT Asian Trade : 18 MMT

1.2

(Million MT)

0.3

5.0

1.2

1.0 2.0 3.0 1.2 China is the key driver for world polymer trade

13

Asia Pacific Polymer Trade (2002) Exporters 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.

Country South Korea Saudi Arabia Japan Thailand Singapore Taiwan India Indonesia Kuwait Malaysia Qatar Others

Importers Exports (KT) 4617 3281 2082 1851 1701 1696 925 505 490 470 370 649 18637

Country China Taiwan Indonesia Vietnam Pakistan Australia Japan Israel Thailand Iran Philippines Others

Imports (KT) 11516 452 444 368 325 323 312 309 300 225 201 969 15744

Asian Polymer Trade value ~ USD 13 billion 1.1 million TEU’s required to move this volume

14

Asia Pacific Container Balance ■

Current global container demand ~ 61 million TEU

■

Huge imbalance in container demand / supply in Asia Pacific

■

Asia to Europe (west bound) and Asia to N. America (east bound) demand is outstripping supply, despite record capacity addition of 640 K TEU’s in 2002

■

Situation expected to ease only by 2006

Source : Mitsui OSK Shipping Research 15

Polymers Exported by Reliance Polymer

HS Code

High Density Polyethylene ( HDPE)

390120

Linear low Density Polyethylene ( LLDPE )

390110

Polypropylene (PP )

390210

16

Reliance Polymer Exports

■

Reliance is one of Asia’s largest exporters of polymers

■

Accounts for ~ 70% of India’s total polymer exports

■

Bulk of polymer exports are manufactured at Jamnagar, Gujarat

■

27% of polymer production is exported

■

Exports from JNPT / NSICT, Kandla , Mundra, Sikka

17

Indian Polymer Producers Export Shares Supreme 8% GAIL 7%

Haldia 17%

Others 4%

RIL + IPCL 64%

18

Reliance Polymer Exports Manufacturing Site

Port

Mode

Products

Jamnagar

Kandla

Containers

PP

Sikka

Break Bulk

PP

JNPT

Containers

PP, PE

NSICT

Containers

PP, PE

JNPT

Containers

PP

NSICT

Containers

PP

JNPT

Containers

PP, PE

NSICT

Containers

PP, PE

JNPT

Containers

PE

NSICT

Containers

PE

Hazira

Vadodara

Nagothane

Gandhar

19

Logistics Constraints - Reliance Experience

■

Major exporting Plant for Reliance at Jamnagar

■

Nearest gateway port Kandla

■

Capacity constraints ex-Kandla limited export evacuation to ~ 1/3 of required volume.

■

Necessitated Innovation – initiated direct break bulk movement via Sikka jetty.

20

Logistics Innovation MOVEMENT - THEN

MOVEMENT - NOW Containers From Kandla

Common Feeder to JNPT

Ahmedabad

Jamnagar

Jamnagar Break Bulk to Jebel Ali

Via Singapore /UAE / to final destination (S.E. Asia)

Break Bulk to China & S.E.Asia

Containers From Kandla

Break Bulk movement initiated 21

Exports – General Concerns

■

Infrastructure

■

Logistics

■

Regulatory

22

Infrastructure • Sub optimal operations at major gateway ports • Lack of timely development of new ports at suitable locations - no container port between Mumbai and Chennai • Lack of connectivity by expressways to ports

23

Infrastructure Comparison

JNPT

Kandla

Jebel Ali

Laem Cha Bang

Singapore

Busan

Container Terminals

2

1

6

5

3

6

No.of Berths

5

4

10

5

20

31

12

10

12

14

17

15

1,573

126

4,194

1,110

16,800

9,436

50,000

30,000

80,000

50,000

150,000

50,000

Draft (m) Volume - '000 TEUs PA Max. size of Vessels (DWT) * Export hub near Bangkok

Indian ports need urgent upgradation 24

Asian Container Ports – Global Ranking (2001) Port

Country

TEU's ('000)

Rank in Asia

2001 World Rank

1996 World Rank

Hong Kong

China

17900

1

1

1

Singapore

Singapore

15520

2

2

2

Busan

Korea

8073

3

3

5

Kaohsiung

Taiwan

7541

4

4

3

Shanghai

China

6340

5

5

18

Shenzen

China

5076

6

8

< 130

Port Klang

Malaysia

3760

7

12

26

Jebel Ali

UAE

3502

8

13

14

Yantian

China

2700

9

17

88

Qingdao

China

2640

10

18

42

JNPT

India

1190

26

49

93

Chennai

India

352

43

123

128

Mumbai

India

321

45

130

69

Chinese ports have upgraded and grown at amazing speeds ! Source : Containerization International

25

Logistics - JNPT  Inadequate equipment  Lack of modernisation  Inadequate productivity  Fewer shipping lines calling  Infrastructure not in line with volume growth

26

JNPT…..

27

Logistics - NSICT  Acute congestion with frequent gate closure  Capacity constraint to store containers  Infrastructure not in line with volume growth  Sharp increase in ICD outbound traffic crowding out factory stuffed export traffic  CONCOR unable to cope with onbound traffic -> congestion at port

28

NSICT…..

29

Logistics - Kandla  Draft restrictions – limiting larger vessels call  Only feeders can operate – restricted to Indian flag  Higher Feedering cost – monopoly of Indian ship owners, lack of global competition  Smaller vessel capacity resulting in lower container throughput  Weekly vessel call – limiting export evacuation

30

Logistics - Mundra  Full fledged operation yet to start  All major lines yet to call  Port hinterland yet to be developed

31

Logistics 





Higher Fuel Cost in India leading to high Inland movement cost. Poor condition & load bearing capacity of roads •

more wear and tear of vehicles

•

slower movement

Ad hoc local regulations - Imposition of load restrictions, issuance / removal of Golden Pass system, permits for inter state movement 32

Regulatory 

Lengthy and cumbersome documentation procedure. - Number of documents per shipment - 17 nos. - Number of govt. agencies – 4 nos. - Number of signatures ~ 150



EDI still to be fully implemented at all major ports.



Public holidays India

17 + 7 addl. Bank holidays Jebel Ali

Thailand China Vietnam

13 Days

16 Days 15 Days 9 Days

33

Documentation - Comparison India Activity

Singapore

# of Documents # of Days taken # of Documents # of Days taken

Removal of goods from plant

7

1

2

0

Customs Clearance

3

1

1

1

Export benefits application

5

5

Export benefits verification

2

12

China Activity

Indonesia

# of Documents # of Days taken # of Documents # of Days taken

Removal of goods from plant

3

0

2

0

Customs Clearance

1

1

1

1

Documentation needs to be simplified 34

Case Study Typical Export Cycle Time – Polymers Indian Port : Kandla Korean Port : Pusan Destination : China INDIA ACTIVITY

KOREA

NO OF DAYS CUM DAYS

NO OF DAYS

CUM DAYS

L/C --> PRESHIPMENT

5

5

3

3

PRESHIPMENT --> DESPATCH

7

12

1

4

DESPATCH --> INVOICE

7

19

2

6

TOTAL DAYS

19

19

6

6

Speed essential to ensure competitiveness

35

Wish list Infrastructure 

Modernization of existing ports and facilities



Govt. grants and facilitation for development of new ports.



Linking all major ports with expressways to existing / planned trunk highways Regulatory





24 X 7 operations - Online customs clearance – EDI  Electronic Data Interchange at all ports Single window and single paper clearance for pre / post shipment procedures & benefits 36

Wish List….. Regulatory 

Dispensing with DEPB / DEEC verification with Customs in the case of exports by Status Holders



In the event of DEPB withdrawal, merger with Duty Drawback based on SION published for export products



Removal of Octroi levy on goods imported under export promotion schemes



Supplies made to SEZ units to be allowed full export benefits ( when invoiced in INR) 37

Wish List…. Regulatory 

Limited Port & Customs Holidays.



Simplified procedure for refund of excise duty paid on inputs used in exported product



Facility to import catalyst for replacement under EPCG scheme and export of spent catalyst for reprocessing



Govt. to exempt export profits from Income Tax, instead of the formula being followed currently 38

Wish List…. Regulatory 



For ISFTA shipments, dispensing with inspection of production site by Export Inspection Agency (EIA) which is currently required after every 10 shipments Deemed exports supplies to be exempted from Sales Tax

39

Recommendations ■

Under a falling import duty regime and implementation of FTA’s, trade volumes will witness a quantum jump

■

Speed of operations and simplicity of regulations will play a key role in enhancing competitiveness

■

A joint industry / government body comprising of representatives from top 10 exporters and Ministries of Commerce, Surface Transport and Finance should be constituted to rationalise regulations.

40

Thank You !