India’s recent trade agreements with Australia and the one with the United Arab Emirates (UAE) entered into earlier are expected to provide some relief in the long run to the country’s seafood exporters who are saddled with unusually high inventory following persistently weak demand in major markets and only a marginal drop in the production of aquaculture shrimp, the mainstay of marine product shipments.
Although Australia and the UAE are currently minor markets for India’s seafood shipments, the industry reckons that it would help export prospects in the future as the major markets such as the US, China, and Europe continue to be dogged by problems of inflation, Covid-19, energy crises and war. Besides, the emergence of Ecuador as the top shrimp-producing nation has threatened India’s dominance in the US market.
“Newer markets could help offset losses in the US and China markets,” said M Nagesh, director, and chief financial officer at Nekkanti Sea Foods Ltd, a prominent seafood processor, and exporter based in Visakhapatnam.
Under the Australia-India Economic Cooperation and Trade Agreement (ECTA) that kicked in on December 29, over 85 percent of Australian goods exports by value to India are now tariff-free, rising to 90 percent in six years, and 96 percent of imports into Australia from India are now duty- free, rising to 100 percent in four years.
The India-UAE Comprehensive Economic Partnership Agreement (CEPA) which came into effect in May last year allows preferential market access to the UAE for almost all of India’s export to the emirate grouping.
There has already been a rise in seafood exports from India to Australia in anticipation of the trade agreement. As per provisional figures from the commerce ministry, exports in value terms shot up to $11.7 million till December FY23 compared with just $4.7 million in the previous year.
Biosecurity regulations for raw seafood are stringent in Australia with particular stress on shrimp produced in virus-free environments. As a result, the focus of the exporters is on value-added products.
Seafood export to the UAE touched $162 million in FY22. This fiscal it has reached $113 million till December. Given the presence of other exporting countries from Southeast Asia, the UAE is a highly competitive market.
Muted demand has not led to many drops in shrimp production in India, though. Production was down by around 2.5 percent till November 2022, according to Ravi Kumar Yellanki, president of the All India Shrimp Hatcheries Association.
“With more inventory carried forward from earlier months and subdued exports, shrimp production is likely to reach 9 lakh tonnes in 2022 compared to 9.24 lakh tonnes in 2021,” he said. However, the mood of the farmers is downbeat with inflationary pressures and the spread of diseases eating into their profits, he added.
The import of shrimp broodstock for aquaculture production fell in the last quarter of 2022, which would mean lower production in the coming months. “This could affect seafood exports in the first quarter of 2023,” added Yellanki.
The association took the initiative to conduct a seafood fair in Andhra Pradesh as part of its efforts to raise the domestic consumption of shrimp. “This could be the way forward as if we could absorb a couple of lakh tonnes of shrimps in the country, it could help ease the pressure on exports,” Yellanki said.
Higher shipments in the earlier months helped to sustain seafood exports till December, though growth has slowed, especially in the last quarter. At $6.28 billion, the provisional figures show a 2 percent increase for the nine-month period to December 2022 from a year ago.
After a record export of $7.76 billion in FY22, the government had fixed a target of $8.6 billion for the current year, around 11 percent higher. However, the prospects of achieving it look remote with lackluster sentiments in all the major markets even after the Christmas and New Year holidays, apart from rising competition.
“Ecuador with its freight cost advantage and higher production has emerged as a major supplier in the US which could jeopardise India’s prospects in the future. Threats of recession and inflation have added to the woes. China has slowed down purchases in the wake of the spread of the Covid-19 pandemic,” Nagesh said.
The Russia-Ukraine war and energy crisis in Europe have increased inflationary pressures, forcing people to reduce consumption of seafood by at least 50 percent in southern European countries such as Spain, Italy, Portugal, France, and Greece, which are the major consumers of marine products, according to Kenny Thomas, managing director of Jinny Marine Traders, a Veraval, Gujarat-based exporter.
“Seafood, seen as a major protein source, has become expensive for the lower classes. Even the restaurants in Europe have hiked prices with edible oil and wheat becoming costly after the war,” he said. Many importers in Europe are cancelling or postponing orders, he added.
Ironically, exporters now feel that the Covid-19 years of 2020 and 2021 were much better in terms of export because of higher demand.
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