Arshiya International Ltd will have three free trade warehousing zones operational by the end of 2010. Ajay S Mittal, chairman and managing director, speaks to Moneylife’s Amritha Pillay about the commercial logic behind such zones

Amritha Pillay (ML): Do you think that this is an ideal time to invest in free trade warehousing zones (FTWZs) in India?
Ajay S Mittal (ASM): Although it is a bit late, I think this is the most appropriate time for FTWZs in India. There is an urgent need for them. Currently, most companies use Singapore and Dubai as FTWZ hubs for product movements in India. These companies assemble or package their products either in Singapore or Dubai FTWZs and send them to India. The moment these products enter India, duty is paid on the entire packed product. These products are then forwarded to the respective channel partners for sale. In case the product remains unsold, then channel partners re-export them to some other country where there is a demand for them and apply for a duty refund from the Indian government. This, however, is a time-consuming process.

So the basic idea behind setting up our own FTWZs in India was to cut down the cost and time. Now with our FTWZ, what will happen is that companies would be able to import their products directly into the zone. As and when required, they can take these products out for sale after paying the duty. And in case the product remains unsold, they would be able to re-export it to some other country, without any tax or duty. So the companies would be able to save on time, as the product would be available to them locally, and their money would not be blocked during the duty refund process.

In a way, our FTWZs would become duty-free import and export hubs that can boost the business of domestic companies.

ML: Out of your three FTWZs at Mumbai, New Delhi and Nagpur, two are located far away from ports. Don’t you think that FTWZs near ports would be more suitable for the kind of business you are planning?
ASM: The FTWZ hub, as a concept, is more profitable when located near a port. However, when you are setting up FTWZs in a large country like India, you need to think about location-specific services. So, we think, there would not be any dearth of business at our FTWZ hubs at Nagpur, which is ideally located at the centre of the country and at New Delhi.

ML: What is the role Arshiya would play in this entire process of import and export?
ASM: Using our freight forwarding arm, we will import products into our FTWZs. Companies can take them out from the FTWZ for sale after paying necessary duty and other charges. If they have to distribute the product across the country, we can help on that front as well. And if the companies want to re-export the product to some other country, that can also be done at the FTWZs.

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