Freight costs, loans take toll on floriculture units

Indian floriculture units are in bad shape these days. Exporters are suffering from high freight costs and problems of settlement of loans with the bankers.

About 50% to 63% of air freight cost disadvantage vis-a-vis their counterparts from east Africa are faced by flower exporters.

The exporters from east Africa make use of dedicated aircraft or chartered flights and adopt economies of scale to route to European destination markets, which are geographically closer to them.

A government scheme for rendering transport assistance to Indian exporters is, however, in place.

But the quantum of subsidy is limited to the least of 23% of the airfreight or 20% of the FoB or a specific rate in rupees per kg. This partly compensates the cost disadvantage to the exporters.

The Agriculture and Processed Food Export Development Authority (Apeda), which is the nodal agency for promoting floriculture for exports, has appealed to the government to increase the quantum of subsidy on freight and put in place long-term assistance scheme, as the present scheme is likely to expire by March 31, 2007.

Another disadvantage for Indian floriculture units is that they import quality-planting materials from against a duty of 8%, while their counterparts in east Africa import against zero duty.

After the TECS conducted a study on rehabilitation of ailing floriculture units in the country and suggested a rehabilitation package, Apeda entrusted AF Ferguson & Co to evaluate the rehabilitation package and identify the sick units for revival.

Before the Ferguson study already 16 sick units have settled their accounts with their bankers and five such units had reached a settlement with their bankers during the course of the study.

This situation has given Apeda to plead with the government for the revival of other sick floriculture units and demand more sops.