International Trade Operations

Project
Development of Export Strategy

ITC HS 040210: Milk

powder not exceeding

1.5% fat

ASHISH KHOLA 12A
DEEPIKA RASTOGI 15A
KHUSHIT MEHTA 21A

Table of Contents
Indian Dairy Industry An Overview
Production Policy and Regulation of Dairy products
Export Scenario of HS 040210
Value Chain Analysis
Incentives for exports
Challenges of Export of SMP
Export Potential of India
Potential destination Russia
Export to Russia - Vital information
References

ITOD Report HS 040210

12A_15A_21A

List of Tables and Figures

Table 1. Milk production in various countries w.r.t ECM and Natural content

Figure 1 Pie Chart showing consumption break up in India

Figure 2. Top milk producing states
Figure 3. Graph showing Exports from India to World for HS 040210
Figure 4. Break-up of Indian Exports in 2013
Figure 5. Growth Percentage in value to the world
Figure 6. Exported Growth Percentage to world year wise
Figure 7. Exported Unit value in US Dollar/Tons
Figure 8. Share of Value In Indias Exports
Figure 9. Trade Balance in 2013 for top 6 countries in USD 1000
Figure 10. Exports Across major destinations during 2008-09 (000 million tons)
Figure 11. Indias exports to Russia, USD thousand

ITOD Report HS 040210

12A_15A_21A

1. Indian Dairy Industry An Overview

The Dairy industry in India has witnessed a remarkable journey in last few decades.
From being a laggard and net importer of dairy products in 1950s and 1960s, India has
covered a lot of ground. India now is worlds largest producer of milk and a net
exporter of milk products. The credit of this transformation is largely attributed to
Operation Flood (a co-operative led movement started in 1970s which took in its fold
millions of small holding farmers who joined the three tier co-operative structure and
increased Indias milk output at a compounded annual growth rate (CAGR) of 4.7%
since 1969, up from a 0.7% CAGR from 1947 to1969) and other important schemes by
the government such as establishment of institutions like the National Dairy
Development Board (NDDB), de licensing of dairy sector MMPO etc.

Table 1. Milk production in various countries w.r.t ECM and Natural content
Now India ranks first in the world in milk production accounting for around 17% of
the global milk production, which has gone up from 53.9 million tons in 1990- 1991 to
127.9 million tons in 2012-13. It also has the largest cattle (185.2 million, 2.1 kg dairy
yield/animal and contributed 38% of total milk production) and buffalo population
(97.9 million, 2.6 kg dairy yield/ animal and contributed 54% of total milk production)
total population in the world. Besides being the largest producer it is also the largest
consumer due to which it is a very minor player in the world dairy market, accounting
for a miniscule 0.08% of the world dairy exports. Vast majority of the milk seldom
crosses the nations border and the focus of the dairy industry mainly remained local.
ITOD Report HS 040210

12A_15A_21A

1.
2.
3.
4.
5.
6.

But the brighter part is that the per capita availability of milk has also increased from
176 grams per day in 1990s to 295 grams per day in 2013-14 vowing to various schemes
like
The Intensive Dairy Development Programme
Strengthening infrastructure for quality and clean milk production
Assistance to Cooperatives, and Dairy Entrepreneurship Development Scheme
Dairy Venture Capital Fund
Dairy Entrepreneurship Development Scheme
The National Project for Cattle and Buffalo Breeding which has been under
implementation since 2000.
A new scheme called the National Dairy Plan Phase I has also been initiated in 2013-14.

ConsumpEon In India
4% 2% 1%
7%

6%
46%

6%

28%

Fluid Milk

Ghee

BuNer

Yogurt

Khoa

Milk Powder

Paneer

Others

Figure 1 Pie Chart showing consumption break up in India

The per capita availability of 290 grams per day is comparable with the world per capita
availability of milk at 289.31 grams per day for 2012. This represents sustained growth
in the availability of milk and milk products for the growing population of the country.
Also the price of milk in India is lower as compared to various countries of the world.
For instance Price in India is half that of USA. Hence promoting milk and its products
as exports is a viable option which the cooperatives and private players can make it
together. The rapidly rising integration of global production patterns and markets and
reducing trade barriers add a boost to the trade.

ITOD Report HS 040210

12A_15A_21A

Figure 2. Top milk producing states

2. Production Policy and Regulation of Dairy Products:

Milk production in India, the world's largest producer, stood at 132 million tonnes in
2012-13.
Dairy production in India runs on a low input output system, in which individual producers
typically own less than five cattle or buffalo and use locally available feeds.
This has resulted in yield levels that are below international averages but also the worlds lo
west production costs.
As dairy product prices and income from milk collection continue to increase, farmers are slo
wly growing herd sizes andincreasing their specialisation. In addition, interests from private s
ector investors have also facilitated construction of larger dairies through partnering with dair
y processors.
Through implementing various incentive schemes, Indian policy makers are aiming to in
crease the countrys dairy output. Examples of these schemes include the Ministry of Agr
icultures research programs, imports of bovine semen and embryos, the National Pr
oject for Cattle and Buffalo Breeding, which focuses on improving Indian indigenou
s breeds with an allocation of USD 255 million. On the other hand, support is also offe

ITOD Report HS 040210

12A_15A_21A

red by the private sector through activities such as artificial insemination services, trainin
g for veterinary care and other livestock management skills.
In 2010, the government and the National Dairy Development Board have drawn up a
National Dairy Plan (NDP) that proposed an expenditure of around USD 378 million to
nearly double Indias milk production by 2020. This plan will endeavour to increase the
countrys milk productivity, improve access to quality feeds and improve farmer access
to the organised market. These goals will be achieved through activities that focus on
increasing cooperative membership and growing the network of milk collection facili
ties throughout India.
In addition, the new Food Safety and Standards Authority of India has consolidated var
ious previous policies that set the sanitary requirements for food safety, machinery, pre
mises, quality control, certification, packing, marking and labelling standards for all foo
d products, including milk and milk products and aims to regulating food safety in I
ndia through one overarching regulation.
The forthcoming regulation, named The Food Safety and Standards Regulation, is imple
mented in 2011. Although the Food Safety and Standards Authority of India sets the
safety standards for both domestically produced and imported milk and dairy pro
ducts, the Ministry of Agricultures Department of Animal Husbandry, Dairying and Fi
sheries is the entity that is responsible for issuing sanitary permits for the import of live
stock and dairy products into India.

3. Export Scenario of HS 040210 from India

Composition of Indian Exports
India exports various categories of milk products including milk powder, baby food,
butter and other fats, casein, milk and cream, cheese, and whey products. Milk powder
and baby food export constitutes around 50% of the total dairy exports in volume terms
during 2008-09, followed by butter and fat, casein, milk and cream and other processed
dairy products. As regards the profile of Indias export basket, Skim Milk Powder
(50%), butter and other fats (21%), casein (11%), cheese and curd (4%), whey products
(3%), milk cream (11%) dominated the export of dairy products from India during 200809.
India's exports represent 5.05% of world exports for this product, its ranking in world
exports is 6. Total export of HS 040210 from India in 2013 is 482543 USD Thousand
Dollars. After 2008 it saw a decline but the export increases in 2011 and 2012.It saw a
major rise in 2013 but it is declined in 2014 again.

ITOD Report HS 040210

12A_15A_21A

Thousands

Export from India to World for HS 040210

600
500
400
300
200
100
0
2007

2008

2009

2010

2011

2012

2013

2014

Figure 3. Graph showing Exports from India to World for HS 040210

Major Countries in which the product is exported from India are Bangladesh, Egypt,
Algeria, Saudi Arabia, Yemen and Pakistan. These are the six major countries in which
the milk powder with fat not exceeding 1.5% is exported. Bangladesh is the leader
importer of HS 040210 from India.

India's Export in 2013

Pakistan
Yemen
Saudi Arabia
Algeria
Egypt
Bangladesh
0

20

40

60

80

100

120

Thousands

Figure 4. Break-up of Indian Exports in 2013

Exported growth in Value is major in 2011-2012, while it is negative in 2010-2011 and
2008-2009. There is also negative growth in 2013-2014. This leads to the pattern of
dwindling export value so that the entire value chain needs to be reorganized and
competitiveness needs to be met keeping in mind the productivity.

ITOD Report HS 040210

12A_15A_21A

Exported Growth % In Value to World

-55

52 -75
36

379

-82

1003
2007-2008

2008-2009

2009-2010

2011-2012 2012-2013

2013-2014

2010-2011

Figure 5. Growth Percentage in value to the world

Now comparing the major Export growth in Quantity from India to the whole world for
HS 040210, 2011-2012 saw a major rise in growth from the last year while there is
negative growth for 2010-2011 and 2013-2014. There is a steep decline after 2012 in the
export of HS 040210 from India.

Exported Growth % in QuanEty to World

-200

200

400

600

800

1000

1200

2013-2014, % 2012-2013, % 2011-2012, % 2010-2011, %

2009-2010, % 2008-2009, % 2007-2008, %

Figure 6. Exported Growth Percentage to world year wise

Now comparing the exported unit value in US Dollar/Tons we get to know that it is
almost in the range of 3200-3600 except 2009 and 2010 in which it is around 2200. It is
maximum in 2014(3581 with a growth of 15%). The growth on an average for the whole
years is around 12.5%

ITOD Report HS 040210

12A_15A_21A

Exported Unit Value,US Dollar/Tons

2014, 3581, 15%

2007, 3239, 13%

2008, 3499, 14%

2013, 3319, 14%
2009, 2311, 10%
2012, 2924, 12%
2010, 2210, 9%

2011, 3040, 13%

2007

2008

2009

2010

2011

2012

2013

2014

Figure 7. Exported Unit value in US Dollar/Tons

Now the Major countries in which milk powder is exported majorly is shown in the
map below.

The share of different countries by value in the export of India is compared for the
recent 5 years and Bangladesh is the leader in the same and Nepal is least among the
top countries.

ITOD Report HS 040210

12A_15A_21A

Share in Value in India's Exported, %

Nepal
Algeria
Syrian Arab Republic
United Arab Emirates
Malaysia
Yemen
Pakistan
Bangladesh
World
0

10

20
2014

30

40

50

60

2013

2012

2011

2010

70

80

90

100

Figure 8. Share of Value In Indias Exports

Trade Balance of India for HS 040210 with top 5 countries is compared and again, we
have a positive trade balance with Bangladesh and Egypt is ranked after Bangladesh.
Algeria remained at third position.
Trade Balance in 2013 for top 6 Countries in USD 1000

34395

30285

95559

35700
39236

Bangladesh

Egypt

74706

Algeria

Saudi Arabia

Yemen

Pakistan

Figure 9. Trade Balance in 2013 for top 6 countries in USD 1000

ITOD Report HS 040210

12A_15A_21A

Export Trends
India exported more than 50 percent of its total dairy products shipments to the United
States, Bangladesh, U.A.E., China, Egypt and Singapore during 2008-09. The trend in
direction of exports indicates that Asia is the major destination of dairy exports from
India. During1991 to 2008 India has exported dairy products to the world market worth
US $ 162.93 million, while the corresponding figure for Asia is US $ 132.86 million. The
exports were made to 105 countries in the world, at least for one year. Among these 40
are Asian countries.
Although the number of non Asian countries is comparatively more than the
Asian destinations, yet the percentage share of all Asian countries together is much
more than the rest of the world export partners. The average share of Asian countries
during the past period 1991 to 2008 is about 80 & 82% on quantity & value basis
respectively. Among the Asian markets, Egypt & UAE are the most top two
destinations of our dairy products. For the past 10 years, 1998 to 2008, UAE is the
largest importer of milk & milk products from India. Singapore and Bangladesh are also
two attractive destinations for dairy exports. The shares of Oman, Yemen, Saudi Arabia,
Singapore, South Korea & Nepal have shown an upward trend after 1997, while
Philippines, Kuwait, Bahrain & Afghanistan suffered a downward trend in their share
of total Indias export to Asia.

Chart Title
25
20
15
10
5
0

Figure 10. Exports Across major destinations during 2008-09 (000 million tons)

ITOD Report HS 040210

12A_15A_21A

4. Value chain analysis of SMP

A process based value chain for SMP was unavailable. Hence, we have shown a process
based value chain for dairy. The value addition in termsof value chain is shown for
SMP.

ITOD Report HS 040210

12A_15A_21A

5. Incentives given to exporters:

Various incentives have been availed to dairy products (come under APEDA) by the
government of India to promote exports which include:
Tariffs and APEDA schemes:
This scheme includes establishment of common infrastructure facilities by APEDA or
any other Government or Public Sector agency. VKGUY earlier covered the export of
SMP (Skimmed Milk Powder).
On November 22, 2012, the Government of India lifted its ban on the export on milk
and cream, concentrated and/or sweetened milk and cream, whole milk powder, dairy
whitener and infant milk foods. On November 21, 2012, India revised its tariff rate
quota (TRQ) on dairy products falling under harmonized system (HS) code 040210 and
04022100 (SMP). Under the notified TRQ, India will permit imports up to 10,000 metric
tons (MT) of SMP per fiscal year at a tariff rate of 15 percent. Quantities above 10,000
MT will incur a 60 percent tariff. During fiscal year 2011/12, India permitted imports up
to 50,000 MT under the TRQ at zero duty.

ITOD Report HS 040210

12A_15A_21A

Schemes for Quality Development

Here assistance provided for setting up/strengthening laboratories, installing quality
management, quality assurance and quality control systems and Activities related to
standardization.
Schemes for Market Development
Assistance is given for development of packaging and establishing packaging
standards, Feasibility Studies, Surveys, Consultancy and Database Up-gradation and
Export Promotion and Market Development which includes brand promotion, trade
fairs, exhibitions etc.
Schemes for Research and Development
Assistance is provided for technology development through R & D efforts with research
institution under Government/Public Sector, recognized exporters associations of
APEDA to support relevant research and development for export enhancement through
R & D organizations in co-operative/private sector.
Certification Scheme for Dairy Product Exports
Dairy products are governed by the Compulsory Quality Control, Inspection and
Monitoring Notification which sets the standards for dairy exports including sanitary
and hygiene. Recognition is also given to the Codex Alimentations Commission (CAS)
standards, the national standards of the importing countries or the contractual
specifications if any, provided these are not below the national standards as specified in
the notification. The notification also specifies the type of quality controls and
inspection as per the export of milk products (Quality control, Inspection and
Monitoring) Rules, 2000, applicable to milk products prior to exports.

6.

Challenges for export of Skimmed Milk Powder:

Trade in dairy products is very volatile, as dairy trade flows can be affected by
(a) Overall economic a situation in a country,
(b) Fluctuations in supply and demand,
(c) Changing exchange rates and
(d) Political measures.
Additional volatility is introduced by the fact that the global dairy market is extremely
concentrated in terms of buyers and sellers; hence, supply or demand shocks are not
easily absorbed.
Increasing Domestic Demand:
Demand for milk & milk products in India are estimated to grow at the fastest pace
amongst major food commodities. Therefore, with huge domestic market & buoyant
demand, there is limited scope for large scale exports of milk & milk products from the
country.

ITOD Report HS 040210

12A_15A_21A

On Again Off Again Dairy Imports and Exports:

Dairy exports were embargoed on February 18, 2011 in response to the Government of
Indias concerns over domestic food inflation pressures. By June 2012, SMP stocks had
grown, driving down prices and causing some local milk processors to threaten to stop
procuring milk. As a result, the embargo waspartially lifted on June 8, 2012, allowing
the export of SMP. Despite opening the market for SMP and casein, exporters report
they were unable to sell significant volumes due to price constraints and buyers lack of
confidence in India as a reliable supplier. Recognizing that stocks remain high at the
beginning of Indias flush production season, the export embargo was completely lifted
on November 1 (allowing whole milk powder, etc. for export).
Government withdrawal of VKGUY incentive:
With milk prices shooting up, the government on Tuesday withdrew the incentive on
export of skimmed milk powder (SMP) to boost domestic supply and cool prices.
"Vishesh Krishi and Gram Udyog Yojana (VKGUY) benefit on Skimmed Milk Powder
has been withdrawn," the Commerce Ministry said in a public notice.
With possibility of shortage of fodder in view of deficient monsoon affecting milk
production, the Cabinet Committee on Economic Affairs (CCEA) on June 9 has decided
to withdraw 5 per cent incentive offered to SMP exporters.
Large Unorganised Sector:
Indian diary sector is also characterized by presence of prominent unorganized sector.
It is estimated that around 40 to 50 percent of Indian dairy farmers are employed by the
organised sector, approximately 65 percent of milk in India is consumed (in fluid or pro
cessed forms) on farm or by the unorganised sector including local milk vendors, whole
salers, retailers and the producers themselves. This makes it very difficult to follow
control and standardize the milk production across India. This results in a lot of
malpractices and inefficiency.
Slump in prices due to excess supply:
Prices of skimmed milk powder, a key constituent in the milk and dairy products
industry, have come down significantly globally and in India due to surplus supplies
and lower offtake during the past two months.
In India, SMP prices have declined to Rs 232-240 per kg, although they are still higher
than international rates of Rs 158-160 a kg. There is huge stock in the country with
export of milk powder closed. Prices will further come down in next few months by Rs
10-120 a kg. There is unlikely to be any increase in prices of milk and milk products for
the next six months," said RS Sodhi, Managing Director of GCMMF, which markets the
Amul brand of dairy products.
Mother Dairy, which sells about 3.5 million litres of milk a day in Delhi, Mumbai,
Hyderabad and the Saurashtra region of Gujarat, also expects prices to stabilise.
"From a high of Rs 280-290 early this year, prices have corrected. The country has
adequate milk powder stock of 20,000-30,000 tonnes and with the flush season to begin,

ITOD Report HS 040210

12A_15A_21A

prices will fall," said S Nagarajan, MD of Mother Dairy. The flush season runs from
October to March, when milk production increases across the country.

Image of Indian Dairy Sector:

Image of our dairy industry and of Indian milk and milk products is not high enough
to export in Western countries. India is lagging behind in terms of:
Milk quality
Storage and handling of milk
Processing of milk
Adherence to food laws
Adulteration of milk & milk powder
Operational Aspects:
There is a great lack of qualified professionals in the Dairy sector leading to haphazard
implementation and inefficiency in production. Due to the sector being dominated by
unorganized small farmers, very little scope for R&D taking place. As a result the
quality of the produce is not up to international standards.

Infrastructural Aspects:
There are a lot of Infrastructural issues that plague the Indian dairy sector,
Shortage of water
Lack of education and understanding of hygiene factors
Inadequate power supply
Dairy Producers Face Distribution Challenges
Strong producer prices and government incentives have helped increase Indian milk
production and have attracted new investment to dairy processing. Despite strong
investment and growing procurement, India still faces fluid milk distribution
challenges (with the exception of some Indian dairy cooperatives). Given that demand
growth is being driven by the fluid milk category, one of the most important challenges
in India is delivering fluid milk to consumers at a competitive rate. Industry sources
indicate that with an unstable export market and a highly competitive informal sector,
new entrants to the dairy industry are challenged to find a remunerative market for
their efforts. As a result, processors are producing increasing quantities of SMP as they
struggle to serve the fluid milk market.
Stocks Will Remain Unchanged
Industry sources forecast SMP stocks to remain unchanged over the next six months, at
approximately 150 thousand metric tons. In addition to the upcoming flush production
season, producers face weak export prospects due to export policy uncertainty. With
strong forecasted production and large stocks, questions are rising on the short term
stability of new dairy investment in India.

ITOD Report HS 040210

12A_15A_21A

Quality Aspects:
As the world is getting integrated into one market, quality certification is becoming
essential However, there are very few plants in the country, which have successfully
obtained the ISO and the HACCP certification. This noncompliance with international
quality and food safety norms such as International Product Standards, HACCP, and
GMP/GHP is a major bottleneck, which becomes a barrier to India's competitiveness in
exports.
Heavy domestic support adds to the woes of developing countries dairy producers:
National policies that support domestic prices or subsidised production often
encourage over- production. This squeezes out imports or lead to export subsidies and
dumping at much lower prices in international markets to dispose of the excess
production.
Developed countries imposing heavy tariffs on imports as compared to developing:
Another point to lay new focus on developing countries as new export markets is the
heavy imports tariffs by the developing countries which are nearly double as compared
to the developing countries.
In addition they also provide export subsidies for their milk and allied products to
dump in foreign markets.

7.

Export Potential of India

India is on of the verge of assuming an important position in the global dairy industry.
The 50,000 tones branded butter market, valued at US $ 133 million is estimated to be
growing at 8.10% annum. The cheese market is estimated to be US $ 110 million in
value terms & has been growing at a compounded annual growth rate of 8 9 % during
1999 2003. The growth in urban areas has been higher at about 15% per annum. The
ice cream market in India is estimated to be about US $ 199 million per annum. A few
corporate players including MNCs are now focusing this market. For example, Nestle &
Britannia have forayed into emerging segments such as Ultra Heat Treatment &
Flavored milk.
Dairying has become an important secondary source of income for millions of rural
families and for millions has played the most important role in providing employment
and income. The per capita availability of the milk has also increased to a level of about
245 gm per day, but this is still low as compared to developed nations or the world
average 285 gm per day. Government of India is making efforts to increase the
productivity of milk animals and thus increase the per capita availability of milk.
The export potential of any product depends largely on two factors: size of the foreign
market & bargaining power of the exporting country.
Changing food habits will have an important role to play in the increase in the demand
for the dairy production in the Asian market. In the times to come, demand will more
for products which are high in poly unsaturated fatty acids, more proteins & lactose.

ITOD Report HS 040210

12A_15A_21A

Specifically, dairy products are more popular in south Asia & there demand is likely to
grow at a faster rate than any other animal products. Cheese & whey based products
will be in the commanding position, thereby replacing fat based products in South &
East Asian market. Due to differences in regional income & population growth rates,
increase in dairy products consumption may occur especially in central & coastal areas,
where potential trade opportunities may exist.

8. Potential Destination - Russia

Conclusion The exports of dairy products from India are increasing. We see a huge
and conducive export potential strategy with Russia. The reasons, supported with
facts, are as follows

1. Russias ban on EU, US foodstuff (Source: Exim News Service - Mumbai, Aug.
12)

Exporters of dairy products will see increased opportunities in the Russian market
post banning of food imports from the US and EU in retaliation against the Western
sanctions over Ukraine. Amul, owned by the Gujarat Co-operative Milk Marketing
Federation (GCMMF), which was indirectly exporting skimmed milk powder (SMP)
to Russia, may now launch its own brands there in butter, cheese and milk powder.
Indias SMP exports to Russia grew ten times to about 3,120 tonnes worth Rs 67.16
crore in 2013-14 from the previous years 310 tonnes valued at Rs 4.53 crore. India
was also trying to export other items like fresh vegetables and poultry products,
sources said.
Russia, which imports 43 per cent of its foodstuff from the West, spends $ 2.7 billion
a year on European fruit and vegetables alone, and also brings in large amounts of
meat, dairy products and processed foods. The Federation of Indian Export
Organisations (FIEO) is hopeful of the EU and US sanctions facilitating a better
opportunity for Indian exporters to enhance their presence in the Russian market.
FIEO is organizing a "Made in India" show in Moscow from September 24-26 to
promote exports.

2. Restrictions Uplifted on Imports of Milk , Cheese and Other Dairy products
Russia has lifted restrictions on the import of milk, cheese and other dairy products
from India less than a week after allowing buffalo meat from the country.
Russian President Vladimir Putin and Indian Prime Minister Narendra Modi are
likely to announce a Joint Study Group for a feasibility study on a Free Trade
Agreement between the two countries, which would boost trade further.
Exporters are excited about the opportunities that Russia holds as Indias exports to
the country during the last fiscal year were just $2.15 billion, a small fraction of
Russias total imports of $318 billion.

ITOD Report HS 040210

12A_15A_21A

We are in a position to export dairy items worth $400 million in the first year itself.
It is likely to go up several fold subsequently, said Ajay Sahai, Director-General and
CEO of FIEO. Amul is already exploring opportunities to enter the Russian market
and is in talks with Russian company Galaktika for export of cheese and dried milk.
Processing units inspected and certified by Russias Ministry of Agriculture can
export their products to the country.With Russia now formally allowing import of
dairy items, more such partnerships will follow. There are hopes that restrictions on
poultry products and egg powder will also be removed soon as the Russian
Government has indicated its interest. Russia imports more than $40 billion worth
of food items from Western countries, and a large chunk of that business can
gradually come to India, the Commerce Ministry official said.

3. Russia is expected to increase imports of fruits, vegetables, meat and dairy
products from India starting December 2014
Under an agreement reached between Russias phytosanitary watchdog
Rosselkhoznadzor and Indias Agricultural and Processed Food Products Export
Development Authority (APEDA) this week.
Russian veterinary experts are expected to arrive next month and may stay in India
to control the production chain and shipment of products to Russia, as is being done
in China. The move will help boost Indias meat and seafood exports to Russia as
well.
India is the worlds largest producer of milk, and a top exporter of meat and seafood
products, but exports to Russia are negligible, partly due to the strict quality
standards and Russias preference for agriculture products from Europe and
neighboring countries.
It is estimated that Russia will have to source food products worth $16 billion as a
substitution for products from EU alone. Russias annual milk and milk products
import requirements are estimated at above 5,000 million tonnes , and the country
used to buy 50% of its dry milk and cheese from the former Soviet Baltic republics
and Finland. The ban has led to huge opportunities for the Indian dairy sector,
allowing Indias largest exporter of milk products, Amul, to become the first Indian
dairy company to enter the Russian market.

4. The Interest of AMUL to export to Russia
Recently, GCMMF had said it is in discussion with Galactika Group to export dairy
products to Russia and once sealed, Amul would become the first Indian dairy
products maker to enter into that market. Amul officials have realized that Russia is
going to be a very good market for Indian dairy products exporters. We can start
exports to Russia after the approvals come. He said Russia presents huge potential
for country's exports as 30 per cent of that country's requirements (dairy products)
are imported.

ITOD Report HS 040210

12A_15A_21A

Russia imports about 8-10 lakh tonnes of milk powder and 20 lakh tonnes of cheese
per annum. "Amul's exports stood at Rs 540 crore last year. At present, the
international prices of milk commodities are very low. We right now focussed more
on Indian market. In India, milk and milk products are growing in double digit. Amul
is growing at over 24 per cent per annum. On Amul's revenues, he said the aim is to
touch Rs 50,000 crore mark by 2020 and this year the turnover may reach Rs
22,000 crore.
"Around 45 per cent revenues come from fresh milk sales. Presently, we have got
the processing capacity of 230 lakh litres of milk and in the next two years we are
expanding it to 320 lakh litres.

5. WTO Accession
Russia became a full member of the WTO in 2012. Its now expected to
follow WTOrules and become integrated into the global economic system.
Russia has committed to:
change customs duty rates to permit access to the Russian services market
apply recognised food safety, and animal and plant health measures
simplify import licensing procedures

6. Growing demand in Russia along with growing exports from India
Russia is currently the eighth largest economy in the world. Its been predicted to
become the largest consumer market in Europe by 2020.
According to data with the Russian Federal Customs Service, import of milk and
products made from Western countries to Russia rose 10.4 per cent in the first
quarter of 2014 to 1,423 million tonnes on a year-on-year basis. Import of milk and
dairy products rose in Russia because of shortage of raw milk and cheaper import
prices.
Indias exports to Russia stood at about $2.15 billion in financial year ended March.
This was a fraction of Russias total import of $318 billion. Of this, about $40 billion
was spent to import food items from Western countries.
Experts have estimated India could export about $400 million worth of dairy
products to Russia in the first year itself.

ITOD Report HS 040210

12A_15A_21A

Value in 2014

Value in 2013

Series1

Value in 2012

2000

4000

6000

8000

10000

Indias exports to Russia, USD thousand

9. Export to Russia Vital information:

Tariff
13.73% (on HS 040210)

Documents required
BIS Certification (mandatory), in addition to the regular documents.
9 documents are required for export to Russia, with a lead time of 36 days.
A COO is not required at this stage, since it wont lead to preferential treatment.

The Federal Customs Service regulates all goods imported into Russia. Customs duty
can be calculated and paid in:
percentage of customs value of goods imported
specific value, charged for one piece of the relevant goods category
combined volume, a combination of the above
Import customs duties are collected based on the classification code and the country
of origin of the goods being imported. In the majority of cases, they are 5%, 10% and
15%. Certain goods are exempt from import customs duties.
The import of certain goods require a licence.

Challenges to Russian Export:

Russia is a geographically vast market, spanning nine time zones and encompassing
over 17 million square miles.

ITOD Report HS 040210

12A_15A_21A

Seriously underdeveloped infrastructure poses logistical challenges, especially in

accessing markets outside of major cities.
An incomplete transition from central planning has led to an insufficiently
integrated economy and disparities in wealth distribution, geographically and
demographically.
Conducting business may be impeded by: burdensome regulatory regimes;
inadequate IPR protection and enforcement; extensive corruption and inadequate
rule of law; inconsistent application of laws and regulations; lack of transparency;
and the continued presence of large state-owned or controlled enterprises in
strategic sectors of the economy.
Recent reforms make it easier for companies to hire expatriate employees, but the
Russian immigration and visa system requires time and patience for business
travelers to obtain necessary permissions to do business in Russia.
English is not widely spoken, although knowledge of the language is expanding,
especially in the major cities.

ITOD Report HS 040210

12A_15A_21A

References
http://www.business-standard.com/article/companies/amul-to-be-first-dairy-firm-toexport-to-russia-114122400485_1.html
http://www.eximin.net/NewsDetails.aspx?name=26384
http://economictimes.indiatimes.com/news/economy/foreign-trade/eu-to-end-milkquota-system-indias-exports-to-take-a-hit-as-dairy-supply-torise/articleshow/46657130.cms

http://www.thehindubusinessline.com/news/international/after-buffalo-meat-russiaopens-doors-to-milk-dairy-products-from-india/article6680023.ece
http://www.indiantradeportal.in/vs.jsp?lang=0&id=0,10,567

http://businesstoday.intoday.in/story/exports-to-russia-may-start-after-regulatoryapprovals-says-amul/1/214197.html

http://in.rbth.com/economics/2014/10/01/indias_food_exports_finding_niche_in_ru
ssia_38711.html
http://www.dairyreporter.com/Manufacturers/Russian-dairy-Galactika-and-Indiancoop-Amul-hold-export-talks
http://in.rbth.com/economics/2014/09/18/indian_dairy_meat_products_may_be_ava
ilable_in_russia_from_december_38389.html

www.trademap.org
www.apeda.gov.in
www.zauba.org
www.google.co.in

ITOD Report HS 040210

12A_15A_21A