A report released by rating agency ICRA states that US government’s move to increase anti-dumping duty on shrimp imported from India will impact exporters and hard.
“Hike in anti-dumping duty (ADD) by USA for shrimp exports may lead to higher prices and making Indian shrimp uncompetitive,” it said.
After the 10th annual of anti-dumping duties by the US department of commerce (US DoC), the average duty was hiked to 4.98%. It was 2.96% previously.
India is now the leading exporter of shrimp to the USA after Thailand’s shrimp production was hit by the Early Mortality Syndrome. In the span of five years, India shifted from cultivating from low-volume, high-value Penaeus monodon (black tiger) to high-volume Penaeus vannamei. The USA is clearly the top consumer of Indian shrimps given that the nation imports about 39% of India’s shrimp exports.
According to the ICRA, India depends on US rather heavily as an export market and this could result in the farmers having to bear the brunt of the hike in anti-dumping duties as exporters/processors have been historically passing the buck when it comes to an increase in costs.
“Lot of Indian exporters will switch to other markets which are erratic. It will not fetch better realisations. If alternative markets do not behave accordingly the exports market may crash. We have no other means but to pass it on the aquaculture farmers. The exports may fall value wise”, said Ajay Dash, president, the Seafood Exporters Association of India (SEAI), Odisha region, when the development became public knowledge in March 2016.
Aquaculture farmers have no choice but to agree with the terms set by processors due to the limited shelf life of unprocessed shrimp. Also, domestic processors usually source in bulk and offer farmers working capital in exchange for contracted supply.
All the more reason why ICRA’s statement that farmers will be hit the most by anti-dumping hike rings true. Passing on the hike to customers will make Indian shrimp pricey. Given the international competition, this is not even an option. For example, when the processes shrimp prices were on a downward fall due to abundant supply, farmers profit took a hit. Processors, however, were insulated against the drop in global prices.
The shrimp processing industry in India is highly fragmented with 223 companies exporting to the US alone.