India’s horticulture sector fails to bloom

The global economic slowdown has dampened exports of flowers from India

Although India is among the world’s largest flower-producing countries, its share in the international market—which is still negligible—declined further with exports falling by 5% during the year 2008- 09. Flower exports dropped to $80.31 million against $84.5 million the previous year.

Karuturi Global Limited is a large exporter of roses to Germany, Japan and all countries in the northern hemisphere including Russia. Karuturi has an area of 239 hectares under rose cultivation and exports 100% of the 650 million roses produced by it annually. Sai Ramakrishna Karuturi, managing director of Karuturi Global Limited said, “Regretfully, India has no role in international markets. India is an insignificant player in the world flower business. Recession has affected business in a big way. We have good weather but that is not sufficient, we need good infrastructure and Africa offers better prospects.”

For the period between 2004-2008, India’s floriculture exports have been growing at a compounded annual growth rate of 15.79%. India was ranked at the 16th position in the world, with a share of 0.8% of total exports in 2007 (with a total of 161,000 hectares under floriculture cultivation). The global export of floricultural products was $17 billion in the year 2007. World exports are expected to reach $25 billion by 2012 with an annual growth rate of 8%. 

Lilies, carnations, orchids and chrysanthemums are the major fresh flowers exported from India but roses dominate India’s production and account for the major share of India’s flower exports. Recently, dried flowers have been forming a large part of floricultural exports from India.

While India has the potential to grow, it still lags behind for several reasons. First, India’s lack of export variety is a major constraint. Second, inadequate infrastructure including improper cooling and storage capacity, high freight rates (50%- 60% higher than the pricing of competitors) and poor transport facilities further impact the business.

Prahalathan Iyer, general manager (research and planning), Exim Bank, said, “India has diverse climatic conditions, favourable to grow large flower varieties. However, it is disadvantageously located, and the cost of freight (especially to the EU and USA) assumes greater role in reducing cost competitiveness, as compared to several African countries. In the last few years, prices of cut flowers in the Dutch auctions have marginally increased. However, industry experts opine that it is not proportionate to the increase in cost of production.”

Mr Iyer added, “The economic crisis has further affected the exportability of flowers produced as there was a decline in demand, in major importing countries such as the EU, USA and Japan. This decline in demand has affected the export levels of Indian floriculture, as also profit margins and employment.”

In order to stay abreast of competition in this industry—where every player is continually innovating with fresh technologies—India must get its act together before it becomes a net importer of flowers.
—Lorain Viegas

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    10 years ago

    Good write up Sir..kindly mail me few more material on floriculture or horticulture...

    Asahi Fibres: When corporate governance goes amiss

    Asahi Fibres’ board seeks shareholders’ approval for corporate guarantee to its associate company for an amount 20 times its net worth, but a year late

    Asahi Fibres Ltd, engaged in the manufacture of yarn and fabrics, got a fresh lease of life in 2008 when the Board for Industrial and Financial Reconstruction (BIFR) revoked its earlier recommendation, issued on 11 November 2002, to wind up the company.

    BIFR held that Asahi’s current management had turned the company’s net worth positive as on 31 March 2007. Since then, the company’s management has flouted corporate governance rules. Asahi gave corporate guarantee in favour of two banks for loans taken by its associate company, Realtime Properties. It was approved by the Asahi Board in December 2008, without the approval from its shareholders.

    What’s interesting is Asahi Fibres, with a net worth of Rs5.40 crore as on 31 March 2009, provided corporate guarantee of Rs190 crore, an amount almost 20 times higher than its net worth.

    Realtime Properties is a unit of Jaybharat Textiles and Real Estate which held 48.5% stake in Asahi Fibres as on 31 March 2009. However, according to the Asahi auditor report, there are no companies under the same management within the meaning of Section 370 (1-B). The auditors, however, are silent on disclosure required under Section 372(B) of the Companies Act.

    Surprisingly, Asahi Fibres’ corporate governance report for FY09-10 states that “none of the transactions with any of the related parties were in conflict with the interests of the company”.

    The report also noted that the company has taken an unsecured loan of Rs117 crore during the financial year ended March 2009 primarily to fund addition to assets. However, there is no disclosure about the corporate bodies from whom Asahi took the loan.

    Asahi Fibres has initiated the process of obtaining a special resolution through postal ballot to seek consent of the shareholders for extension of the corporate guarantee. The company, in its notice for postal ballot, has blamed “exceptional circumstances” for preventing the Board from obtaining prior approval from members in 2008. Asahi Fibres’ shares are suspended from trading on the Bombay Stock Exchange (BSE).

    Moneylife sent an email to Asahi Fibres seeking a clarification on the “exceptional circumstances” that prevented it from following the due process of law and applicable mandatory disclosures. However, the email remains unanswered, till date. 

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    Pantaloon to invest Rs360 crore in retail space

    Pantaloon Retail is also looking to hive off its value retail chain, Big Bazaar, into a separate subsidiary which may float an IPO.

    Pantaloon Retail India Ltd (PRIL), the country's largest listed supermarket operator, plans to spend Rs360 crore in the remainder of this fiscal to add up to 2.4-million sq ft of retail space to existing operations, reports PTI.
    "We have a capacity expansion (capex) plan of Rs360 crore to add up 2.4 million sq ft of retail space...That is in the Pantaloon Retail balance-sheet and not the subsidiaries. That's the plan for the balance seven-eight months of this financial year," Pantaloon's managing director, Kishore Biyani, told reporters after the company's 22nd AGM.
    The company, a part of the diversified Future Group, begins its financial year in July. The Future Group operates 15 million sq ft of retail space across India, of which Pantaloon Retail, with its multiple lifestyle and value chains, operates around 13-million sq ft.
    Pantaloon Retail is also looking to hive off its value retail chain—Big Bazaa—into a separate subsidiary, which may eventually float an initial public offer (IPO).
    "We are looking at spinning off Big Bazaar into a separate company... If we need capital, probably we can raise it through a public issue," Mr Biyani said.
    He said the company will open 155 Big Bazaar stores by 2014, increasing its total network to 275 stores. PRIL also plans to deploy a part of the Rs500-crore it raised through a QIP issue last week for expansion and debt reduction.
    — Yogesh Sapkale

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