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Fonterra targets India as Greens sympathise with Indian farmers

Tuesday 11th October 2011

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Fonterra is investigating setting up dairy farms in India, the world's second-most populous country, while the Green Party is sympathising with efforts by Indian farmers to protect their domestic agriculture.

The divergence of agendas between New Zealand's largest business and the political party came through in a report by the Foreign Affairs, Defence and Trade Committee that recommends a push beyond major cities in India by both the New Zealand government and private sector.

The Inquiry into New Zealand's relationship with India identifies New Zealand’s role as a co-host of the 2015 Cricket World Cup as an opportunity and potential for the film, education and technology industries.

But dairying stands out as the big area of opportunity because India's protected dairy industry may struggle to supply a market that is already the largest consumer of dairy products and is forecast to double over the next 15 years.

"We were told that the Indian dairy market has multi-billion-dollar potential for New Zealand, but only if tariff and regulatory barriers are removed," the report said.

New Zealand exported $136.9 million worth of dairy products to India in the year to March 2011. India’s tariffs on dairy products range between 20 and 60 percent.

Fonterra, which is investigating the feasibility of dairy farming in India, submitted that New Zealand will need to make the running to advance its relationship with India.

"Fonterra is prepared to contribute resources for this purpose alongside the Government," the report said.

Last year, Fonterra entered into a memorandum of understanding with Indian Farmers Fertiliser Cooperative and Global Dairy Health to look at a pilot farm in India. That came several months after Indian farmers protested the importation of New Zealand dairy products, resulting in an attack on a milk tanker.

The Parliamentary committee report said that while the Green Party supported improved trade with India, it did not favour the wholesale removal of controls on trade and investment.

The party believed that the desire of New Zealand dairy companies to increase dairy exports to India should be balanced by India’s interests in maintaining a sustainable domestic dairy industry.

"The Green Party is for stronger national interest tests on foreign investment in New Zealand, and a level of protection for New Zealand industry and services, particularly from low-wage competition. We also sympathise with efforts by Indian farmers to protect their domestic agriculture, which could be undermined by a rapid and substantial removal of tariffs on imported food."

During the next 10 to 15 years India’s middle class is predicted to rise to approximately 400 million people or 40% of its population, increasing the appetite for imported food and consumer products.

The report recommends the appointment of honorary consuls outside of New Delhi and Mumbai, in addition to the one in Chennai, in the event of the successful conclusion of a free trade agreement.

In April 2010 New Zealand and India commenced negotiations on a bilateral free trade agreement. There have been six rounds of talks so far and the negotiations are expected to conclude in 2012.

The committee urges the Government to look beyond the Beachheads programme for help to businesses and that effort should be concentrated in cities and states identified after consulting with business.

New Zealand is represented in India by the New Zealand High Commission in New Delhi and the Consulate-General in Mumbai. New Zealand Trade and Enterprise also has offices in New Delhi and Mumbai.

India is emerging as an important investor, with $US75 billion in overseas investment in the past decade. In 2010 Indian foreign direct investment in New Zealand was $NZ105 million, an increase of 95% from 2009.

Links between Bollywood and the New Zealand film production industry have been instrumental in stimulating tourism from India and negotiations are under way for a bilateral film co-production agreement which would encourage more cooperation between the respective film industries and greater tourism flows from India.

But the lack of a direct air link between India and New Zealand was mentioned by submitters as an impediment to increasing the number of Indian tourists visiting New Zealand.

The India–New Zealand Air Services Agreement allows a non-stop link to Mumbai, but to date no airline has provided such a link.

New Zealand’s role as a co-host with Australia of the 2015 Cricket World Cup was an opportunity for New Zealand to increase its profile in India and attract more Indian visitors.

"We recommend that the Government actively grasp opportunities presented by co-hosting the 2015 Cricket World Cup with Australia," the report said.

The committee received 23 submissions from the organisations and met between May 19 and Oct. 4 to consider the inquiry.

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