India now on the trade menu for the long haul

AT Delhi’s hottest new restaurant this week the chief chef’s signature dish, Anticucho Australian lamb, was flying off the menu.

An overzealous customs service is the bane of companies around the world trying to do business in India.

AT wintry Delhi’s hottest new restaurant Town Hall this week the executive chef’s signature dish, Anticucho Australian lamb, was flying off the menu.

It is both good news and bad for the Sydney-based Australian importer, Mulwarra, and Town Hall’s talented head chef, Augusto Cabrera.

Good news for Mulwarra, which has been selling Australian lamb into the notoriously difficult Indian market for almost three years, but potentially problematic for Cabrera, who faces an ongoing weekly battle to secure the meat from his Australian suppliers.

The former Oberoi hotel sushi chef already buys much of his charcuterie, salmon and lamb from Australian importers, and is looking to expand the range of products he sources from them.

But a free trade agreement between India and Australia — which both countries hope to conclude before the end of this year — is unlikely to ensure more consistent access to the products essential to his menu.

“At the moment supply is so unreliable that we have to source through several Australian suppliers,” Mr Cabrera told The Weekend Australian.

“If lamb is not available from one, then we get it from another supplier because we have to have it on our menu.”

The problem is not the Australian exporters but India’s clunky Customs service.

It is the bane of his business in India, admits Mulwarra’s business development executive, Rory O’Connor, who joined a 450-strong Australian trade delegation for Australian Business in India this week.

Mulwarra imports its high quality lamb, fish and charcuterie all over the world but India — potentially the world’s largest consumer market — represents a tiny 0.5 per cent slice of that pie.

“Getting product cleared through Customs once it arrives is the biggest problem we have. We only ship small amounts of frozen product into India because it can take up to 50 days to clear the airport,” says O’Connor.

Compare that with Singapore where a shipment can be in a buyer’s cold store within five hours of arrival on the docks.

Prime Minister Narendra Modi has spent the first nine months of his five-year tenure selling India as a business destination to the world and promising to remove the byzantine red tape which has defeated so many investors and importers in the past.

This week his message was buoyed by new World Bank forecasts which suggest India will be the world’s only major economy to see consistent growth this year, on the back of falling oil prices and expectations of a friendlier foreign investment climate.

India’s apparent economic miracle stalled under the former Congress-led government — reaching a record 9 per cent GDP growth in 2007 only to almost halve by the time it was voted out of office last May.

Though India ranks a dire 142 out of 189 countries in the World Bank’s global ease of doing business list, Modi has vowed to bring the country into the top 50 during his first term in office.

Since his May election, he has used ordinances to raise foreign direct investment from 26 per cent to 49 per cent in the defence and insurance sectors, promised a more consistent and business-friendly tax regime, flagged reforms to the restrictive land acquisitions act and an end to state-owned Coal India’s monopoly over coal mining.

It is music to the ears of big Australian players such as Rio Tinto, ANZ, Telstra and Woodside, all of which joined Trade Minister Andrew Robb’s business delegation this week and have been chipping away at the Indian market and its onerous domestic regulations, bylaws and protections for years.

Alongside the major players however, Robb, who has vowed to return to India as many times as is necessary this year to conclude a bilateral trade deal, says an FTA is only as good as the number of small and medium-sized businesses who also take advantage of it. And there are many of those who are still rightly leery of India’s many pitfalls.

Cabrera, a Filipino who has worked in India for 11 years, hopes Customs will be among the first of Modi’s red tape targets.

India’s changeable customs regulations, including new food health safety standard labelling laws that the Bombay High Court last year described as “unreasonable”, have already managed to defeat some of the world’s biggest food and beverage names.

Both Lindt chocolate and Pernod Ricard announced last year they were pulling back on imports into India after failing to secure the release of millions of dollars in imported food and beverages held up in Customs for many months.

The country’s food safety standards authority has held up thousands of tonnes of perishable shipments in recent years on the grounds that sticker labels conforming to specific Indian labelling laws — but affixed on top of original labels that already conform to harmonised food safety standards — are not acceptable.

O’Connor agrees labelling is one of the big issues he faces in India.

“You can run up 10,000 labels but they keep changing what has to be on it,” he says. “That’s part of doing business in India. We have been talking to various government people about that this week.”

What an FTA will do is alleviate the tariff burden, which is significant for companies such as Mulwarra. It pays up to 40 per cent impost on its lamb at the airport gate.

Its Mumbai distributor then faces further state taxes when it ships the meat across borders into other Indian markets, though that is small beer compared to the 150 per cent tax imposed on imported wines and spirits.

Notwithstanding the hurdles, O’Connor says Mulwarra won’t turn its back on what he estimates is a potential 100 million middle to upper class Indian customers, despite similar calculations on India’s consumer market luring thousands of SMEs onto the rocks before him.

“Yes it is hard work, yes we are not doing as much business as we would like, but we will keep working on it. It is a long game.”

Not for Klaus Zimmerman, an aged care executive who also joined the Australian delegation this week in his role as a board member of CommonAge (Commonwealth Association for the Ageing), a non-profit organisation devoted to improving aged care facilities across Commonwealth countries.

Along with representatives from Curtin University and other training houses looking to roll out badly-needed aged care training programs in India, Zimmermann joined the delegation to review business opportunities for Australian residential and centre-based aged care providers.

His conclusion: a definite not right now.

“It is an immense country with immense issues in the ageing sector but the systems and services available in Australia would not be easily repeated in this country,” Zimmermann told The Weekend Australian from Pune.

“I think when India gets a bit wealthier there will be opportunities but right now there’s not a huge government focus on services for the ageing and those who are providing it focus on home care because building aged care homes is very expensive.”

The most obvious opportunity for Australian providers is in aged care training, given the lack of trained staff and “variable” quality of service, though “you almost have to be prepared to be here on a break-even basis because you can only charge about one tenth of what you could in Australia”.

On his way out of the country last night, an upbeat Robb hailed the success of his four-city tour, pointing to meetings with Modi, Finance Minister Arun Jaitley and India’s richest industrialist Mukesh Ambani, as well as agreements signed between Woodside and the Adani Group on LNG supply, Wollongong University and Pandit Deendayal Petroleum University on mining excellence, the National Australia Bank and the State Bank of India and the SAE Institute and Reliance Media in the film sector.

Australia and India are “on the cusp of a new dawn in their commercial relationship”, Robb says.

 For Zimmermann there is not yet light on the horizon.

“India right now is a high volume, low margin market. I can’t see how I could deliver services at the Indian price point that would make a viable proposition. I think the only way an Australian company could provide aged services right now in India is on a charitable basis,” he says.

“The need is here. The money is not.”