Yaroslav Tarasyuk, Russian Trade Representative in India. Source: Courtesy Trade Mission of Russian Federation in India
During the last three years, trade turnover with India has been falling, amounting last year to less than $7.8 billion. Will this decline be halted this year?
I believe it will be. We are taking all possible steps to ensure that business activity grows. We have increased the amount of joint projects, increased mutual trade in goods and services. This year we are anticipating a visit by a very high level Indian delegation to the 20th St. Petersburg International Economic Forum. India will also be a partner country of the main Russian industrial fair – the INNOPROM 2016. In addition, New Delhi will host the first BRICS Trade Fair, in which Russia will have a large national pavilion.
The Russian and Indian leaders set a goal in 2014: to increase bilateral trade to $30 billion, and mutual investments to $15 billion by 2025. This goal was based on the expectation that large-scale cooperation projects would be implemented, such as the construction of a series of Russian-designed nuclear power plants or projects in the oil and gas sphere. Historical experience shows that small and medium enterprises (SMEs) greatly assist in achieving such goals. Such businesses in Russia and India have shown considerable interest in bilateral cooperation.
What is the main problem when it comes to trade with India?
The very complicated logistics. We are hoping that the North-South International Transport Corridor (ITC) will start operating soon, which would involve cargo shipments through Iran. In February this year, the Russian Railways Holding and Azerbaijan Railways agreed to work together to attract freight traffic to the North-South ITC. The cost of transporting a 40-foot container from Mumbai (India) to Moscow, through Iran and Azerbaijan, will not exceed $3,000. Of course, sea deliveries will always be cheaper, especially now that prices for sea transportation have been greatly reduced because of the crisis in world trade, but when it comes to speed, the overland route beats water transport. By sea, a container needs 40 days to travel from St. Petersburg to Mumbai, while rail transport can cut this time in half, and in future, to just 14 days.
Also, we have only started developing financial support mechanisms for exports. The Russian Export Centre is now operating. Sberbank of Russia, which has a branch in India, is now actively offering settlements in national currencies. Nevertheless, these instruments must be further developed and promoted.
Will Indian companies participate in the privatization of Russian state-companies Alrosa and Rosneft?
The question is what will be offered to the Indians, and on what terms. Rosneft and ALROSA are well known in India, and interest in working with them is high; and Indians do have the money.
What are Russian companies proposing to your trade mission?
They are coming to us with a great variety of proposals, and the flow of these requests is growing rapidly, because of ongoing work by the Russian Ministry of Economic Development and various trade missions in supporting Russian exports. Since 2014, the number of requests has doubled. On offer are a variety of energy, metallurgy and transport equipment, production and processing technologies for mineral resources, water treatment, waste management, medical devices, wood processing products, agricultural and food products. Chemical products, including fertilizers, even oil and gas equipment are very popular in the Indian market, despite the fact that these must, in India, meet requirements of the American Petroleum Institute (API). Russian producers often do not obtain the appropriate certifications.
The Trade Mission will now work on implementing two initiatives in India. The first will be directed at Indian companies: “Made in Russia. Become a distributor in India”. The second: “R&D in Russia. Make in India” is aimed at helping Russian companies fit into the “Make in India” campaign, launched by Prime Minister Narendra Modi. We came up with this idea after a visit by a delegation from the Tomsk Chamber of Commerce, representing mainly innovative companies, to the state of Kerala.
In Russia, there are many companies with interesting developments, but they lack resources to commercialize them. Indians are ready to help commercialise these developments, with an eye on not only the Indian market, but also for potential sale to third countries, like West Asia, with whom they have good contacts.
The “Make in India” programme can also be used to adapt Russian products to demands of the domestic market, with key components still being manufactured in Russia. The experience of KamAZ shows that no matter how good the product is, it will not succeed in India without adaptation. At its assembly plant in India, KamAZ had to strengthen the chassis and make the truck bodies more capacious, because these vehicles are mercilessly used in India.
Was India able to increase food exports to Russia after the embargo on deliveries from Europe?
Indian companies have started delivering Buffalo meat, but dairy products are not being supplied yet, as Indian producers have not received the “green light” from Rosselkhoznadzor, although negotiations are underway. Indian dairy companies are prepared to start deliveries. Most likely, these will primarily be cheeses, because dry milk in India is more expensive than in other countries.
Everyone had expected that cheese supplies would be allowed last year, but negotiations are still dragging on.
The Russian side had assumed quite a tough position in the beginning. There was a requirement that milk deliveries to Russia should only come from farms that have at least 1,000 head of cattle, but in India, only 3% of dairy farms can boast this quantity. In reality, only two companies were ready to start making deliveries. For Indian producers, this was a serious barrier. Now this requirement has been lifted; Rosselkhoznadzor’s position has changed dramatically, and we expect that in the near future, I think before the end of this year, first deliveries will be made.
What else do Indians wish to export to Russia?
One of the main items that India exports to Russia is pharmaceutical products. Many discussions are now taking place about companies that wish to sell their drugs in the Russian market; that they should move their production facilities to Russia. Indians are very cautious when it comes to taking this step. They do not wish to invest in projects from scratch. Raw materials for their products come mainly from China, and labour costs in Russia are higher. Nevertheless, one way or another, this process will develop in the future. For example, one of the largest Indian pharmaceutical companies, Lupin, has now confirmed that it has purchased the Russian pharmaceutical manufacturer Biocom in the Stavropol Krai, to manufacture its products at an already operating plant.
Indians also supply a variety of agricultural products to Russia, and textiles and engineering products. Today, Indian companies are capable of producing high-quality energy, oil and gas equipment, and their tractor and automobile manufacturing sectors are rapidly developing. The Indian company Bajaj is already supplying motorcycles, and is planning to bring to the Russian market the super-cheap car ‘Qute’, which is a quad-bike that looks like a car.
Has the economic crisis in Russia had an impact on joint projects?
There has been a general decline in world trade volumes, with Indian exports also falling for the second year in a row. In India, they want to take advantage of sanctions which the West has imposed against Russia, to boost cooperation. For our part, if many projects involving India were put off earlier, more and more companies are now looking at attracting Indian investors. About $30 billion is invested abroad by Indian companies each year, in a variety of areas; not only in mining, but also in metallurgy, automobile manufacturing, car components, and pharmaceuticals. Part of these resources can be attracted to Russia, especially for the implementation of regional projects.
In this sense, it is encouraging to see that Russian regions are coming and offering their projects, and the quality of the submitted projects has significantly increased, because of good work by the Agency for Strategic Initiatives. In January, representatives of Penza and Kostroma Oblasts, Bashkortostan and Mordovia visited India and, frankly, I am proud of the way these regions were represented.
India will become one of the first countries in which a Russian Trading House will open. What will this give us?
A trading house is needed primarily by SMEs, because very often these do not have a commercial agent in India. One cannot always rely on an Indian distributor. Often, when there are issues of maintenance or defective components, retailers may be sluggish in their responses, and this ultimately affects the reliability of Russian products, and the subsequent desire to purchase them. So I see the trading house as a consulting company, with future transition into a foreign trade company, representing the interests of Russian manufacturers.
The Eurasian Economic Union and India have created a working group to study the feasibility of creating a free trade zone. What can this mean for Russia?
In India, Russian-made machinery and equipment are taxed at rates from 10% to 30%, and this presents a serious obstacle for exporters. Clearly, if customs fees are eliminated, then the opportunities for these manufacturers will be much wider. India has signed a free trade zone agreement with the Republic of Korea, and our manufacturers have already started suffering as a result. However, sometimes it is difficult to reconcile the conflicting interests of Russian manufacturers of similar products, because some wish to sell their goods in the Indian market, while others want to manufacture them locally, and these are not interested in having customs duties eliminated. I expect that by the end of this year, we will have clarity about the feasibility of creating a free trade zone.
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