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The Bloom Is Off These Indian Roses (Int'l Edition)


International -- Asian Business: INDIA

THE BLOOM IS OFF THESE INDIAN ROSES (int'l edition)

India's growers are finding the export business mighty thorny

It seemed like a sure bet. New Delhi decided India could be a key player in the world's booming cut flower industry and backed it up by offering subsidies--and 100% tax-free profits--to potential growers. That was five years ago. Since then, India's huge corporate groups, including Tata, Birla, and Goenka, have invested about $85 million in setting up nearly 40 flower farms, mostly around Pune, south of Bombay, and the South Indian city of Bangalore. The Indians had acted on the advice of consultants from the Netherlands, a world leader in flower production. They said Indian soil was ideal for floriculture and would produce rich colors because of the high amount of sunlight.

Today, that bloom of enthusiasm has faded. Although India's flower exports grew from $1.6 million in 1990-91 to $16.5 million in 1995-96, its floriculture companies are wrestling with destructive pests, import restrictions on pesticides, inadequate international flights, poor management, and a lack of technical knowhow. Only about 20% of India's growers are earning a profit. Officials say a fourth of the growers are in serious financial trouble, while the rest are struggling around the breakeven point. "The Dutch [consultants] gave a very rosy picture of those roses," says N.R. Seshadri, assistant director of the government Agricultural & Processed Food Products Export Development Authority. "They didn't tell us that there were thorns also."

India has less than 1% of the world market for wholesale cut flowers, and it is finding the competition stiff. Global demand is increasing 7% a year, and production in Europe, Latin America, Africa, and Israel is keeping pace. In this tight market, the quality of the flowers, and the reputation of the country, is critical. Last year, prices for Indian blossoms plummeted when millions of damaged flowers--some rotten, bruised, or diseased, and others badly packaged--arrived in Japanese and European markets. Of the 17 million Indian flowers sent to Japan, only about 20% were acceptable to consumers. "Before 1996-97, our market was starting to give recognition and credit to Indian flowers," says James Reece, import manager for major Japanese flower trader Flora International Co. Now, Reece reckons it will take years to repair the damage.

HOT RUNWAYS. Some Indian growers already had a reputation as unreliable suppliers who shop for the best deals instead of developing long-term relationships. "You have to establish your name with buyers, not just go after the highest price of the day," says Peter-Paul Elkhuizen, coordinator of India affairs for Flodac, a Dutch flower marketer for Indian companies.

Government restrictions and problems with India's infrastructure are also hurting competitiveness. The import of key pesticides is restricted. Airports lack adequate cold storage--crucial for perishables like flowers--and neither Bangalore nor Pune has an international airport. Flowers from Pune must be driven 4 to 6 hours to Bombay, while those from Bangalore are transferred from one plane to another. Flowers have been left sitting on hot airport runways for hours, or even days, before being sent to their final destination. Freight rates from India are also high, undermining India's other cost advantages.

Yet despite the hurdles, there are reasons for cautious optimism. "They are fighting so hard seven days a week to improve their quality," says Robert de Bos, project manager in Bangalore for Holland's Noordam Roses. Growers are beginning to talk of cooperating to prevent a repeat of last year's fiasco. Dedicated refrigerator cargo facilities are being installed at the Bombay and Delhi airports. And some growers are already looking toward expansion. Pune-based Praj Agro-Vision plans to extend its rose cultivation from three hectares to five next year. "We see the potential as quite high," says CEO Ganesh Sanker. With proper nurturing, India's flower exports may yet blossom.By Amy Louise Kazmin in Pune


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