Traffic at Major Ports Declined by 4.2% in February
According to the latest data released by the IPA, traffic at major government-owned/regulated ports in India fell by 4.2% YoY in February. Traffic has fallen in 9 out of 12 ports in February 2009. Tuticorin port has had the sharpest decline at 32% YoY. Traffic
at ports like JNPT and Kandla have fallen by 19% and 13% respectively.
Overall traffic for the period April 2008-February 2009 has grown by 2.24%YoY. However, most of the growth has been front-ended – while traffic grew by ~5.3% in the 7 months of Apr-Oct08, it has fallen by 2.6% in the last 4 months.
Container volumes have fallen off sharply, with volumes down 26.2% in February. Bulk cargo trends remain mixed, fertilizer and coking coal volumes are down 40% and 49%, respectively, whereas POL, iron ore and thermal coal volumes continue to grow. MICT terminal at Mundra, container throughput for the month of February was ~44325, down 34% YoY.
Week rupee helping out battered exporters
Indian rupee has once again lost significant ground against dollar over last few days. The development reflects that de-leveraging continues in international markets as the global economic crisis deepens further. Changing fortune of rupee however has come as a rescue to the exporters.
Marred by the global demand slowdown amidst languishing recession in west, the exporters will certainly take relief in the fact that rupee has touched Rs 50 mark against dollar. However, significant gains will only accrue of the currency remains weak for some time, at least over next few months.
Another problem is that many exporters had hedged the currency at higher levels fearing further appreciation in rupee. These will certainly be unable to take the advantage of fresh weakness in the rupee, at least in short term.
Most currency watchers believe that rupee will continue trading range bound, but with lower side risk, against the dollar in near term. The news does cheer exporters, though they contend that volatile currency was no good for their already shrinking realisations and will wait to see rupee staying low for few months before celebrating.
Indian exports have fallen substantially over last few months as the consumer spending and hence demand went down in key destinations like Europe and US. During the quarter ended December, India’s exports fell by about 10% while the same are apprehended to have gone down by more than 20% in January.
Govt amends SEZ rules to benefit developers
The government has amended rules for suppliers of goods to special economic zones (SEZ) to claim export incentives like duty draw backs in the domestic currency and simultaneously asked the developers to provide housing to staff and workers within the tax-free enclaves. And the tax benefits and concessions have been extended to the sub contractors as well.
The amendment concedes gems and jewellery units in the SEZs would be allowed to re-import the goods exported if their buyers default on payments. The government has urged the developers and co-developers to strive for housing facilities for their workers in the SEZ.
MMTC likely to pick out iron importers
State-run mining giant MMTC has floated bids for selecting pig iron importers and bids are to be submitted by February 12, The company would be eligible if its average gross sales stand at $100 million and gross profit of $5 million in the last three years.
It also noted that the companies should either be the actual user of pig iron or trading companies dealing in steel products for at least three years.
Government to ease forex credit for exporters
In order to boost the confidence of exporters at a time when global trade is declining in wake of recession, the government plans to ask the Reserve Bank of India (RBI) to relax rules governing forex credit. The move will help banks extend dollar loans to cash-strapped exporters at easier terms.
A major step in this area will be raising the ceiling of maximum interest payment that Indian exporters can pay on international loans from currently 1% above libor (London Interbank Offered Rate) to 4% above libor. Libor is the rate at which international banks borrow from each other in Europe and also serves as a benchmark for corporate loans.
Raising the ceiling will help increase the flow of funds to exporters. After the credit crunch overtook international markets, the cost of dollar funds for Indian banks increased to between 2% and 2.5% above Libor and therefore they are also not in position to lend to exporters within the current rate cap.
Indian exporters failing to compete Chinese on pricing front
European and American buyers are asking Indian exporters to match the Chinese prices in wake of the global economic slowdown and resulting aggressive pricing policy adopted by China. Federation of Indian Chambers of Commerce and Industries – FICCI has found in a survey that Indian exporters are struggling to compete their Chinese counterparts on pricing issue.
Due to the ongoing recession in both Europe and US, consumer spending in these countries has declined sharply and as a result demand for imports is also going down. Chinese importers in this wake are relying on an aggressive pricing policy to maintain export momentum.
However, the development is proving to be hard for Indian exporters which are increasingly seeing the demand from importers to match Chinese prices. FICCI believes that since China has an edge on India in terms of cost of production, in current times of severe slowdown, Indian exports may go down further in coming months as producers here will not be able to meet Chinese prices.