India Inc’s bear hug with Russian consumers is getting warmer. From selling marquee cars to liquor, the relationship is heading into the next league — joint ventures (JVs) in diverse areas such as petrochemicals, telecom, pharmaceuticals and nanotechnology.
Just a few weeks ago, in a first-of-its-kind major cooperation in the private sector between India and Russia, the Mukesh Ambani-led Reliance Industries (RIL) formed a JV with Russian petrochemical company Sibur. The JV will make butyl rubber for automobiles at RIL’s integrated petrochemical complex in Jamnagar. While Sibur will give technology for polymerisation and finishing, RIL will supply monomers.
In another development, Sistema-Shyam Telecom (SSTL), a JV between Russia’s Sistema and Shyam Group of India, has offered to build a national crisis management centre, set up a ‘safe city’ programme for Delhi, and implement space communication services in India, based on Glonass — the Russian analogue of the US Global Positioning System (GPS).
Sistema has a 73.71 per cent stake in SSTL. The Russian government is expected to buy a 20 per cent stake in SSTL for around $676 million (Rs 3,200 crore) by October.
Vneshtorgbank (VTB), a Russian bank, and Sistema have also set up their offices in New Delhi.
Thanks to such initiatives, the Indo-Russian bilateral trade is set to touch the $10-billion mark in 2010. Already, the two countries have done a business of close to $8 billion this year, compared to $7.46 billion in 2009. While India’s imports from Russia stood at $5.9 billion, exports were to the tune of $1.5 billion in 2009, according to data provided by the State Customs Committee of the Russian Federation.
Encouraged by the spurt in bilateral trade, both countries target to double it to $20 billion by 2015.
“Both sides have taken lots of efforts in the past few years to improve the trade ties and the results are beginning to show. Considering the potential of both countries, the targets are definitely very small, when compared to Russia’s annual trade with China, which runs into over $50 billion,” said Pripuran Singh Haer, secretary general of Indo-Russian Chamber of Commerce, and former ambassador.
Nevertheless, opportunities are beckoning in some sectors, like the Indian pharmaceutical one. At least half a dozen Indian companies are gearing to set up joint manufacturing facilities in Russia.
“Indian companies should explore joint production facilities in Russia, as that country is targeting to make 80 per cent of its drug requirements domestically in the coming years. Indian drug makers should leverage their proven track record in quality generic drug production and can help the Russian manufacturers,” said Ashok Kumar, secretary, Department of Pharmaceuticals.
India’s share in the Russian pharmaceutical market is a meagre 5.89 per cent. Multinational companies, like Sanofi-Aventis and Novartis, are the main drug exporters to Russia, which imports 80 per cent of its medicine requirements. India’s pharmaceutical exports to Russia stood at $532 million in 2008, 26 per cent more than the previous year.
“The real growth in Indo-Russian business relations can come from the pharmaceutical sector. We are in discussions with Russia for easing regulatory clearances and speedy registration of products,” said Rajeev Kher, joint secretary, Ministry of Commerce and Industry.
Drug exporters from India were facing problems in shipments, realisations and product registrations, said P V Appaji, executive director, Pharmaceutical Export Promotion Council (Pharmexcil).
Next generation technologies are also gaining prominence as both countries are exploring major cooperation in nanotechnology, genomics and bioinformatics. A recent delegation from India, led by Commerce Minister Anand Sharma, held discussions with Russian Corporation of Nanotechnologies and Russian Academy of Sciences to explore joint research initiatives in nanotechnology.
Nevertheless, more work needs to be done to unlock the potential of Indo-Russian trade, according to Pripuran Singh Haer.
In July, Indian exports to Russia were to the tune of Rs 1,313.03 crore and imports were worth Rs 6,058.69 crore, according to data provided by the commerce ministry. India mainly exports pharmaceuticals, tea, coffee and spices, apparel, edible preparations and engineering goods to Russia. It imports iron and steel, fertilisers, non-ferrous metals, paper products, coal, coke, cereals and rubber.
| WITH LOVE FROM RUSSIA # Thanks to various initiatives, the Indo-Russian bilateral trade is set to touch the $10-billion mark in 2010 # India's pharmaceutical exports to Russia stood at $532 million in 2008, 26 per cent more than the previous year # Next generation technologies are also gaining prominence as both countries are exploring major cooperation in nanotechnology, genomics and bioinformatics |
Further, Russians entrepreneurs prefer to deal with the European countries and countries like China. Logistics is a major issue. While a truck loaded in Germany can reach Russia within two days, it takes 40 days for shipments from India to reach Russia.
Before the disintegration of the erstwhile Soviet Union, Odessa, a natural port in Black Sea, was the direct port for Indian exporters to ship their goods to Russia in less than 15 days. Now this port belongs to Ukraine. Indian exporters have to ship their products through Europe, mainly using Finland as the gateway.
The India-Russia CEO Council — formed two years ago, with Mukesh Ambani and Vladimir Yevtushenkov (chief executive of Systema) as chairmen — was practically a paper organisation and had not initiated any serious business dialogue between the entrepreneurs of two countries, noted Haer.
