Seafoods sector needs consolidation to survive

The country's marine products export sector needs consolidation to achieve economies of scale to take on emerging global competition, industry officials said.

"We need to achieve global sizing like China, Thailand, Vietnam," said A J Tharakan, vice-chairman, Marine Products Export Development Authority, on the sidelines of India International Seafood Show-2008.

Describing Indian seafood companies as "Mickey Mouse export operations" Tharakan said "there is still not one $100 million (Rs 400 crore) seafood company in India". "This is average size of profitable seafood companies in Asia," he said.

Consolidation catalysts Indian seafood sector will remain a marginal business globally if it fails to consolidate production, sales, and marketing, Tharakan said. "Indian seafood business are all family owned. Therefore, consolidation can only be effected by a catalyst such as a merchant banker or major private equity player," he said.

However, he said there are no such developments on the horizon so far.

Indian seafood companies should also look for joint ventures with companies in major importing countries, said Anwar Hashim, president, Seafood Exporters Association of India.

A major reason for success of countries such as Thailand and Vietnam in global marine trade is due to joint ventures with companies in major importing countries, he said.

Japanese companies were interested in joint ventures with Indian seafood companies in early 1980s but the move failed to take off due to restrictions on foreign investment in those days, he said.

"We still have chance as the country is blessed with a coastline of 8,000 km as well as vast pool of inland water resources," he said.

Vannamei shrimp competition Competition from vannamei, a variety of white shrimp, largely produced in countries such as China, Thailand, and Vietnam, is one of the major problems faced by seafood exporters, said K.G. Lawrence of Geo Seafoods, a Kochi-based export firm.

Cost of production of vannamei shrimp is 50 per cent lower compared with the black tiger shrimp, India's main export, he said.

Black tiger shrimp accounted for 54 per cent of the value out of Rs 8,363 crore earned by India from marine products export in 2006-07 (April-March).

The country's aquaculture is mainly focused on black tiger variety of shrimp and the demand for the same in global market is facing sharp decline due to competition from vannamei, said Tharakan.

"India is unable to compete on the aquaculture shrimp front against its Asian competitors. China, Thailand, Vietnam and Indonesia have all switched massively from black tiger to vannamei," he said. Selective introduction of vannamei shrimp culture should immediately permitted so that Indian will have a well-balanced mix of black tiger and vannamei production to meet international market demands, he said.

Rupee appreciation The appreciation of rupees by over 15 per cent during the year has posed serious problems for marine exporters, said G Mohankumar, chairman, Marine Products Export Development Authority.

Average export earning was down around 20 per cent in the first nine months of current fiscal following rupee appreciation, he said. Quantity of export may also fall 15-20 per cent to 500,000 tonnes in 2007-08 (April-March) from a year ago mainly due to fall in availability of fish from sea, he said.

When raw material, power and labour accounted for 90 per cent of cost of production, it is difficult for exporters to become cost efficient to offset the burden caused by the rupee appreciation, Tharakan said.