SUMMER TRAINING REPORT

ON

MMTC Limited
IMPORT OF ROCK PHOSPHATE
Submitted in partial fulfillments of the requirements of Post Graduate Diploma in Business Management Programme By:

CHANDNI JAIN 2007-09 (FT-07-540)

ACKNOWLEDGEMENT
I would like to express my gratitude to all those who gave me the possibility to successfully complete my summer internship project. I want to thank the fertilizer department of MMTC Ltd. for giving me permission to commence this project in the first instance, to do the necessary research work and to use the departmental data.

I am deeply indebted to my supervisor Mr. Alok Singh, Senior Manager, MMTC Ltd. whose help, stimulating suggestions and encouragement helped me in all the time of research and for writing this project report.

I would also like to thank Mr Gaurav Kataria, Deputy Manager, MMTC Ltd. and Mr. Neeraj Vats, Purchase Manager, Rapid Engineering Company Pvt. Ltd. for their on-time guidance and sharing their indepth knowledge on imports.

I am very thankful to my mentor, Mr. Rajiv Kumar, Faculty of IILM, Graduate School of Management for his consistent support and interest that he has shown in this project.

Last but not the least, I would like to thank my family and friends, specially Mr. Atish Vishal and Ms. Sonali Singh for their help, support and valuable hints and for clearing things out in difficult times.

This project could not have been possible without help from my father.

CHANDNI JAIN (PGDM 07-09) IILM-GSM

PREFACE
As a leading player in fertilizers and fertilizers raw material, MMTC Ltd. has become a major fertilizer marketing company in India, through planned forward integration of its import activities and direct marketing of Urea, DAP, MOP, Sulphur, Rock phosphate, SSP and other farming and agricultural inputs. I carried out a search process and tried to look into the various options available for MMTC to start the imports of rock phosphate. In India the economy being predominantly based on

agriculture, the fertilizer production plays a pivotal role. Only about 35% to 40% of the requirements of raw material for phosphatic fertilizer production are being met through indigenous sources and the rest is met through import in the form of rock phosphate, phosphoric acid and direct fertilizers.

This project will enable MMTC to once again start the import of rock phosphate, which was discontinued after 1992 when the import of rock phosphate was decanalized under Mr. ManMohan Singh as the finance Minister.

TABLE OF CONTENTS
Part 1: COMPANY INTRODUCTION
1.1 About the company10 1.2 Company History.11 1.3 Ownership patterns..13 1.4 Financial profile.14 1.5 Products..17 1.6 Competitors..............................................24

Part 2: PROJECT
2.1 Statement of Problem....27 2.2 Objectives..28 2.3 Import Procedure.29 2.4 Modes of payment..35

Part 3: ANALYSIS
3.1 Demand and production..40 3.2 Import Scenario..46 3.3 SWOT Analysis.60

Part 4: Conclusions....62 Part 5: Recommendations.64

Part 6: Annexure
Annexure-I68 Annexure-II.70 Annexure-III..72 Annexure-IV73 Annexure-V.74 Bibliography...75

COMPANY INTRODUCTION

ABOUT THE COMPANY

Established in 1963, MMTC, one of the two highest foreign exchange earner for India, is a leading international trading company with a turnover of over US$ 5 billion. It is the largest international trading company of India and the first Public Sector Enterprise to be accorded the status of "FIVE STAR EXPORT HOUSE" by Govt. of India for long standing contribution to exports. MMTC is the largest non-oil importer in India. Its vast international trade network, which includes a wholly owned international subsidiary in Singapore, spans almost in all countries in Asia, Europe, Africa, Oceania and Americas, giving MMTC a global market coverage. Following are the major heads under which MMTC works: Minerals Precious Metals Metals Coal and Hydrocarbons Fertilizers Agro Products

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COMPANY HISTORY INDUSTRIAL RELATIONS

Cordial and harmonious industrial relations continued to prevail in MMTC Ltd. with no-man days being lost during the year. Joint Consultative Machinery(JCM) meetings were held with the apex forums of employees for arriving at amicable decisions on personnel issues besides encouraging them for active participation in management. MANPOWER The aggregate manpower of the company as on 31st march 07 stood at 1997. Voluntary retirement schemes were offered which was availed by 4 officers of the company. TRAINING Aiming towards further enhancing/upgrading the skills of employees in the fast changing business scenario, 1801 employees were imparted training during the year through programs organized with in-house expertise as well as external resources from renowned institutions/organizations in different spheres of companys activities.

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VIGILANCE To enhance the goodwill & confidence emanating from value based business practices and for strengthening the company as a professionally managed, globally interactive & internationally reputed organization, the Vigilance Group of MMTC carried further its focus on system improvement and preventive vigilance. CORPORATE GOVERNANCE Corporate Governance is an area of major significance for all those who are affected by organizations in some way, whether as investors, to directors, employees, suppliers, and customers or the community in general. The company is committed continuous development, adoption dedication towards the best corporate governance practices.

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OWNERSHIP PATTERN

Category

No. of shares held

Percentage of shareholding

Promoters Holding -

4,96,65,600

99.33%

Indian Promoters - President of India including his six nominees holding one share each 2 Institutional Investors - LIC Mutual Fund Other Bodies Corporate 3,31,535 0.66%

325

0.00%

Individual holders having share capital upto Rs.1 lakh including NRI shareholders

2,540

0.01%

Total

5,00,00,000

100%

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FINANCIAL PROFILE
According to the 44th Annual Report 2006-07, the company achieved its Highest ever business turnover of Rs. 233016.23 million during 2006-07 registering a growth of 42% over the previous year. This ever-best business turnover since MMTC's inception in 1963 includes Exports of Rs. 34131 million and imports of Rs. 186074 million -- both the highest ever performance in last 44 years. The other trade related earnings contributed Rs. 445.13 million. The net profit earned by your Company recorded a growth of 17% over previous year and is the highest profit earned by the Company since inception. This noteworthy performance is despite intense competition faced by the Company in all its trade activities -- both from local as well as International players, putting considerable pressure on margins, which was responded to through growth in core operations by competitive offering of products bundled with efficient services as also by successfully tapping new areas of business by innovative value addition, aggressive marketing efforts and better utilization of available resources. The highlights of the performance during 2006-07 are summarized below:14

Exports Imports Domestic Other trading Earnings Net Sales/ Trading Earnings Trading profit Profit Before Taxes Profit After taxes Dividends (i) Interim Dividend on Equity Shares (ii) Proposed Dividend (iii) Dividend Tax Reserves and Surplus

2006-07 34131 186074 12811 445 233461 2497 1893 1268 125 123 39 8321

(Rs in million) 2005-06 29254 117858 16512 310 163934 2218 1679 1083 125 125 35 7833

FERTILIZER/FERTILIZER RAW MATERIALS The fertilizer group of MMTC surpassed its best ever performance during 2005-2006 and contributed a turnover of Rs. 22634.44 million representing an impressive growth of over 66%. The factors attributing to the noteworthy performance of the group include MMTCs expertise in bulk handling, domain knowledge, hands on experiences and expertise, skills to predict emerging trends and its ability to act and respond promptly. Over the years the group has developed an excellent and sustained network with overseas suppliers and customers besides maintaining long-lasting relationships. In
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fertilizer trade, which is dependent on various factors like monsoon, Govt. policy etc, this wealth of domain knowledge and relationships shall be the prime factor for groups growth in future. The consumption of fertilizers is growing in India leading to increased shortfall between consumption vis--vis indigenous productions resulting in increased volume of imports. For the year the company has planned for further increase in business volumes by tapping these emerging opportunities which will be further increased due to enhanced focus of government on agricultural sector besides normal monsoon expected during current year.

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PRODUCTS
MINERALS MMTC is major global player in the minerals trade and is the single largest exporter of India. With its comprehensive infrastructural expertise to handle minerals, the company provides full logistic support from procurement, quality control to guaranteed timely deliveries of minerals from different ports, through a wide network of regional and port offices in India, as well as international subsidiary. MMTC has won the top export award from Chemicals and Allied Products Export Promotion Council (CAPEXIL) as the largest exporter of minerals from India for the 13th year in a row. The main items of trade of MMTC is iron-ore, manganese ore, Chrome ore, and others which include Mud Chemical, Barytes, Bentonite, Bauxite, Talc, Gypsum, Feldspar, Quartz or silica sand, Garnet sand, Kaolin(China Clay), Vermiculite. MMTCs mineral sales are on FOB basis only. MMTC Limited, Indias first Super Star Trading House continues to be the countrys leader in mineral exports for four decades now. During the last decade, MMTC could withstand the stiff competition in the world market but its

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continuous and persistent efforts in diversifying its markets, enlarging its product range, expanding extensively its infrastructure facilities and expertise in mineral operations and by attaching utmost care and importance to its trade commitments as also the quality of service and products. PRECIOUS METALS MMTC Ltd. is Indias Premier bullion trader, handling more than 100 MTs of Gold & 500 MTs of Silver. The precious Metals Division has consistently contributed considerable proportion of the total turnover of the company. MMTCs Precious Metals Division is in to a range of activities covering imports, exports and domestic retail trade. MMTC imports and supplies bullion to exporters under various provisions of Foreign Trade policy. Different schemes being followed are as under: On Loan Outright Basis On Replenishment basis Exporters wishing to avail gold on Loan Scheme from MMTC need to be registered by submitting information in the prescribed format.

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Applications for outright purchase have to be submitted along with the notational value of gold intended to be purchased by the party and BG for custom duty. Delivery would be against the price fixation payable along with fixing commission, CIP, Delivery charges and MMTCs service charges etc. Gold would be delivered to an authorized representative of the exporter against payment of the differential if any, of actual and notational value. Exporters wishing to avail gold I replenishment basis from MMTC need to register themselves with their application in prescribed format. The quantity of Precious Metal booked shall be equivalent to the Precious Metal content in the exported product and the admissible wastage. An initial deposit of 20% of the notational price declared by MMTC will be made with registration. Delivery of gold would be made against receipt of full payment together along with interest. METALS MMTC Ltd. - Indias Largest Trader of metals. Its metals division imports and exports non-ferrous metals, Industrial raw materials, steel items, pig iron, non-ferrous metals scrap and iron and steel scrap etc. MMTCs share of imports in Indias import of refined non-ferrous metals in terms of value is about 20%

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MMTC imports following metals as per LME deliverable specifications and also Npn LME grade material according to the requirements of our customers: Base Non-Ferrous Metals: Copper (min. 99.90% purity) in the form of Wire bars, Cathodes, CC rods Aluminium (min. 99.70%) Zinc Ingots High Grade (min. 99.95%) Zinc Ingots Spl. HG (min 99.995%) Lead Ingots (min. 99.97%) Tin (min. 99.85% purity) Nickel min 99.80% purity) (Squares 4X4, uncut Briquettes, Ferro Nickel etc) Minor Metals : Antimony (min. 99.65% purity) Silicon (Grade 4-4-1 and 5-5-3) Magnesium (min. 99.9% purity) Mercury (min. 99.9% purity) Industrial Raw Materials, Noble metals and ferro alloys

Pig Iron, Slag. Steel scrap, HR coils, CRGO and steel items.

COAL AND HYDROCARBON Coal and Hydrocarbon is identified as one of the core areas of business for MMTC and Steam coal is identified as a thrust product for import. The Coal and hydrocarbons business has achieved a turnover of Rs. 18390 million in 2004-05. The above turnover is comprised of mainly LAM COKE, Coking Coal and steam coal.

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During 2004-05, MMTC transacted a business of around 1.19 million tons of coking Coal, O.50 million tonnes of LAM COKE and 1.39 million tons of stream coal. A quantum jump both in value and quantity of coking coal and non-coking steam coal total 5 million tons valued at Rs.2500 Million is expected during 2005-06. MMTC withstood the stiff competition due to its continuous and persistent efforts in diversifying its markets, offering value added products range and customer base, expanding extensively its infrastructure facilities, using its expertise in trading by attaching utmost care and importance to its trade commitments as also the quality service and product. Certain specific strengths of MMTC, which make it a strong player in this sector, are:

Strong business relationships with the leading coal mines and reputed suppliers of various coal and hydrocarbon products. List of suppliers whose credentials are established are also updated from time to time. They are retained by MMTC for sourcing.

Elaborate infrastructure facilities for bulk handling with arrangements for rail and road transport, warehousing, port and shipping operations, which gives MMTC complete control over trade logistics.

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 One of the biggest international traders in bulk in the country. Importing non-coking steam coal continuously for the power plants under long-term contracts FERTLIZERS MMTC Ltd. is one of the largest importers of fertilizers in India. It imports finished fertilizers, fertilizer intermediaries and fertilizer raw materials. The volume of trade in fertilizers today stands over one million tones. MMTC has established itself as a trusted and reliable supplier of fertilizers with major consumers in India. The result of a very high reliability and the resultant reputation, MMTC has so assiduously built over the last four decades. MMTC has a leading edge in sourcing, procuring and distribution of fertilizers in India and in neighboring countries. It is one of the worlds largest institutional buyers of the fertilizer. It basically imports in bulk. It tries its best to secure competitive prices through bulk buying. MMTC has strong links with state marketing agencies. As a leading player in fertilizers and fertilizer raw material, MMTC has become a major fertilizer marketing company in India, through planned forward integration o its import activities with direct marketing of urea, DAP, MOP, Sulphur, Rock Phosphate, SSP and other farming and agricultural products
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AGRO PRODUCTS MMTC Ltd. is a global player in Agro Trade, with its comprehensive infrastructural expertise to handle agro products. MMTC Ltd. provides full logistic support from procurement, quality control to guaranteed timely deliveries of agro products from different parts of India through a wide network of regional and port offices in India and its contacts abroad. Items of Trade 1) 2) 3) 4) 5) 6) 7) Wheat Rice Maize Soyabean Meal Sugar Edible Oil Pulses

COMPETITORS
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The State Trading Corporation of India Ltd. (STC) STC is a premier international trading house owned by the government of India. Having been set up in 1956, the corporation has developed vast expertise in handling bulk international trading. Though dealing largely with the East European countries during the early years of its formation, today it trades with almost all the countries of the world. By virtue of infrastructure and experience possessed by the corporation, it plays an important role in arranging import of essential items into India and developing exports of a large number of items from India. STC imports bulk commodities for Indian consumers as per the demand in the domestic market.

Indian Potash Ltd. (IPL) IPL has completed more than 50 years in fertilizer trade in India. IPL has equity partners from private, public and cooperative sector of fertilizer industry. The organization was set-up for import, handling, promotion and marketing of potash in the entire country. The organization has grown with MOP to AS, urea, DAP, SSP, RP, SOP, gypsum and cattle feed. Understanding the need of farming community

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and assisting them to enhance prosperity has been the driving force behind IPLs sales promotion and extension activities.

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PROJECT ROCK PHOSPHATE

STATEMENT OF PROBLEM
26

The import of rock phosphate was decanalized w.e.f 1st March 92. Before that period, MMTC was the only largest trading house authorized to import rock phosphate and had the entire market share. But after decanalization, the monopoly which was enjoyed by MMTC could no longer exist. A large number of firms began to import rock phosphate in bulk. As a result, MMTC lost its business as far as rock phosphate was concerned and it had to stop the imports immediately. The present scenario is such that there are a large number of players like small trading houses, govt. trading houses like MMTC, many foreign trading houses with good reputation and having operations in many countries. MMTC, which had abruptly stopped the imports of this fertilizer, wants to once again start its imports due to the increasing demand of rock phosphate. So the task is to look into the possibilities of imports of rock phosphate in order to meet the growing demand of this fertilizer.

OBJECTIVES
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Following are the objectives of this report To make a list of all those companies outside India those are ready to export rock phosphate in bulk. To examine the historical data for the demand of rock phosphate in India and to check the projections of the demand of rock phosphate. Also to see whether the production meets the demand of rock phosphate. If not, then how much quantity has been imported in the past? Who are the major exporters of rock phosphate and how much have they supplied in India in the past? On the basis of this data, we will try to find out the feasible options of the countries from where we can import.

IMPORT PROCEDURE
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Importing is not just understanding the past scenarios but is a lot more than that. A number of formalities have to be fulfilled in order to receive the imported good here in India. At MMTC, I looked into the complete procedure for importing goods to India. MMTC, basically, is a government trading house and acts as an intermediary between the buyer in India and the seller in some other country. The complete procedure is as follows: Firstly, MMTC receives the request of goods (in our case, rock phosphate) from buyers, who list their specifications and other requirements of rock phosphate. MMTC takes either 98% or 100% advance payment from the buyers before they get into the import procedure. On the basis of the requirements of the buyer, MMTC quotes global tenders. Then, they receive bids either directly from suppliers or their agents which are doing their business in other countries.

29

 Next, MMTC opens the tenders and once they are

successful, comparative statements of the bidders is made. They are then considered for allotment on the basis of the prices quoted by the suppliers. The comparative statement is then presented to the Sales/Purchase Committee (SPC) of MMTC. The SPC then shortlists and approves certain suppliers from the comparative statement hence created. Then MMTC contacts the suppliers with their own terms and conditions. Next, we receive the Performance Guarantee (PG) Bond from the suppliers, which stays with us till the whole transaction is completed. This bond can be invoked at any time in case of any discrepancy in the transaction process. Performance sometimes bank guarantee upon to to bonds: execute to Exports bonds ensure are duly due called

guaranteed by the bank. The exporter has to furnish guarantees MMTC performance. Once we receive the PG bond, we open the letter of credit (L/C) and the vessel is nominated. Letter of credit: A letter of Credit is a signed instrument and an undertaking by the bank of

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MMTC to pay the seller in some other country a certain sum of money on presentation of documents evidencing shipment of specified goods subject to compliance with the stipulated terms and conditions. Loading takes place at the suppliers end. MMTC gets the shipment advice from the suppliers. Documents are negotiated against the L/C. The following documents are necessary:

Commercial invoice: It is a customs declaration provided by the person or

Corporation that is exporting an item across international borders. A commercial invoice is primarily used to calculate tariffs. Bill of Lading (B/L): It is a document issued by a carrier, acknowledging that specified goods have been received on board as cargo for conveyance to a named place for delivery. Certificate of origin: It is an instrument which establishes evidence on origin of goods imported into any country.

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 Certificate examination

of

inspection: of the

This

is by

a a

certificate declaring the result of an goods recognized independent inspection body which is a guarantee for the importer that the goods are of right quality. Certificate of cleanliness of holds: This certificate ensures that the holds are clean, dry and free of previously shipped cargo. Load Port draft Survey Report Other documents which may/may not be required: Beneficiary Certificate of inspection Certificate of quality, quantity & total value Stowage plan MMTC then releases the payment as per the L/C. The clearance is done by the buyer himself. Original documents are released by MMTCs bank after full payment. Then, MMTC gives the documents to the buyer who then produces these documents at the clearance and hence gets the possession of the goods. Documents are in the name of MMTC and are endorsed to the buyer.

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This is the entire procedure for the imports. DUTY TO BE PAID: Following are the certain duties, which a company in India has to pay at the customs office once the products have entered India: 1) Custom Duty (as per the product) 2) Educational Cess on CVD.. 2% 3) Sec and Higher Educational Cess on CVD 1% 4) Customs educational Cess 2% 5) Customs Sec and Higher Educational Cess. 1% 6) Additional Duty.. 4% Custom Duty Custom duty is the tax levied on imports, and sometimes on exports as well, by the customs authorities of a country to raise revenue and/or to protect domestic industries from more efficient or predatory competitors from abroad. The custom duty is different for different products. The custom duty on rock phosphate is 12.5%

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Barring Custom duty, all other taxes levied on the goods entering India are constant.

MODES OF PAYMENT

34

The rapid growth and expansion in the global trade cannot be sustained without efficient or and delays timely in payment for arrangements. Nonpayment payment

imports could tie up limited credit facilities and create liquidity problems for many exporting companies. The ideal payment method is one that protects the contending interests of both the buyers and sellers. CONSIGNMENT SALES This is a method in which the exporter sends the product to an importer on a deferred payment basis; that is, the importer does not pay for the merchandise until it is sold to a third party. This method is rarely used between unrelated parties, for e.g.: independent importers and exporters. It is best used in cases involving an increasing demand for a product for which a proportioned stock is required to meet such need. However, in MMTC no dealing is done on consignment basis. MMTC buys from other countries only when they have an Indian buyer who has made full or 98% advance payment for the goods to be imported by MMTC. MMTC acts as an intermediary between the seller in some other country and the Indian buyer. CASH IN ADVANCE

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This method of payment requires the buyer to pay before the shipment is effected. The seller assumes no risk of bad debt and/or delays in payment because advance payment is precondition to shipment. Cash in advance is sometimes used between related companies. It is also common to require money in advance for samples. Again, MMTC does not go for advance payment in cash because they deal in bulk. LETTER OF CREDIT A letter of credit is a document issued by a financial institution which provides an irrevocable payment undertaking to a beneficiary against complying documents as stated in the credit. It is often referred to as a documentary credit, documentary letter of credit or simply as credit. Refer to annexure for a draft of L/C. DISCREPANCIES: of credit or Discrepancies other occur when documents Most

submitted contain language or terms different fro the letter some apparent irregularity. discrepancies occur when the exporter does not present all the documents required under the letter of credit or because the documents do not strictly conform to the L/C requirements.

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There are three kinds of discrepancies: ACCIDENTAL DISCREPANIES: These are discrepancies that can be easily corrected by the exporter (beneficiary) or the issuing bank. Such discrepancies include typographical errors, omission to state the L/C number, errors in arithmetic, and improper endorsement or signature on the draft. MINOR DISCREPANCIES: These are minor errors in documents that contain the essential particulars required in the L/C and can be corrected by obtaining a written waiver from the buyer. Such errors include failure to legalize documents, nonrepresentation of all documents required under the L/C, and the discrepancy between the wording on the invoice and the L/C. MAJOR DISCREPANCIES: These are discrepancies that fundamentally affect the essential nature of L/C. Certain discrepancies cannot be corrected under any circumstances: presentation of documents after the expiry date of L/C, shipment of merchandise later than the specified date under the L/C. AMENDMENT OF L/C: (ANNEXURE II) Amendment requires the approval of the issuing bank the confirming bank (in L/C, or expiration of L/C. However other major discrepancies can be corrected by the amendment of the

37

case of a confirmed L/C), and the exporter. Examples of discrepancies that can be amended include presentation of an incorporated bill of lading, a draft in excess of the amount specified in the credit, and making partial shipments not allowed under the credit. Discrepancies that can be corrected must be rectified within a reasonable period of time after shipment and before the expiry of the letter of credit.

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ANALYSIS

DEMAND & PRODUCTION

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The following table depicts the demand of rock phosphate (In thousand tones) in India from 1990-2007.
YEAR 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 DEMAND('000 TONNES) 3221 3321.2 2843.8 2669.3 2931.7 2897.5 2976.8 3913.6 4112.2 4797.9 4214.6 4382.4 4018.8 4124.3 4623.8 5203.7 5543.3

The drive into biofuels production by countries is pushing the demand for rock phosphate. The increasing demand for this fertilizer can be easily seen by the following chart

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DEMNAD
DEMAND( in thousand tonnes) 6000 5000 4000 3000 2000 1000 0
19 90 -9 1 19 92 -9 3 19 94 -9 5 19 96 -9 7 19 98 -9 9 20 00 -0 1 20 02 -0 3 20 04 -0 5 20 06 -0 7

Series1

YEAR

If we observe the graph which depicts the demand of rock phosphate over the years in India, we observe that the demand has been increasing since 2002 though it had experienced a dip in the previous years. But after 2002, the demand for rock phosphate has been increasing steadily. Now let us look at the production of rock phosphate within India. Following are the already existing reserves in India: 1) RAJASTHAN Jhamarkotra Maton, distt. Udaipur Kanpur, distt. Udaipur 2) MADHYA PRADESH Katamba distt. Jhabua
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 Cherty carbonate Hirapur Chattarpur sagar distt.

1)

UTTAR PRADESH AND UTTARANCHAL a. Maldeota, distt. Dehradun b. Durmala, distt. c. Sonrai Lalitpur distt.

Following is the total production of rock phosphate in India in thousand tones.

YEAR 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07

QUANTITY('000 TONNES) 584 477.6 372.7 361.1 483.7 513.2 509.9 613.2 610.5 565.2 438.8 400.7 385.2 406.9 393.8 447.2 475.5

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PRODUCTION QUANTITY in thousand tonnes 700 600 500 400 300 200 100 0
-9 9 -0 3 -9 1 -9 3 -9 5 -9 7 -0 1 19 98 20 02 -0 5 20 06 19 90 19 92 19 94 19 96 20 00 20 04 -0 7

PRODUCTION

YEAR

The production of rock phosphate in India has not been much. There has been sharp increase and sharp decrease in the production over the years.

DEMAND Vs PRODUCTION
QUANTITY in thousand tonnes 6000 5000 4000 3000 2000 1000 0 1991-92 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 2000-01 2001-02 2002-03 2004-05 2005-06 1999-2000 2006-07 1990-91 1992-93 2003-04 DEMAND PRODUCTION

YEAR

Though the production has started growing since 2004 but it has not been able to meet the growing demands of this
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fertilizer. So, in order to meet the eThe production of rock phosphate in India has not been much. There has been sharp increase and sharp decrease in the production over the years. Though the production has start since 2004 but it has not been able to meet the growing ver increasing demand, rock phosphate needs to be imported and that too in large quantities. PROJECTION FOR THE DEMAND Following is the demand projections for the next 4 years:
QUANTITY( '000 YEAR 2008-09 2009-10 2010-11 2011-12 TONNES) 6380 6680 6980 7290

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PROJECTION OF DEMAND QUANTITY in thousand tonnes 7400 7200 7000 6800 6600 6400 6200 6000 5800 2008-09 2009-10 2010-11 2011-12 YEAR PROJECTION OF DEMAND

We can very clearly see that the demand is likely to increase linearly for the next few years. In order to keep up with the growing demand of rock phosphate, MMTC must import rock phosphate. Since we cannot increase the production within the country, it would be beneficial for the country if we import from other countries. Since India is mostly a agriculture based country, so fertilizer requirements have to be met.

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IMPORT SCENARIO
As we have just seen that the production of rock phosphate within the country is unable to meet the demand requirements of the fertilizer. As a result, large quantity of this fertilizer needs to be imported. After decanalization of rock phosphate, MMTC had put a break in the import of rock phosphate because they had started loosing their business. However, due to the growing demands of rock phosphate and its limited supply within our country, as we have just seen, MMTC wants to once again start its business in rock phosphate. The first five major producers of rock phosphate are: China USA Morocco Russia Tunisia

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The other producers of rock phosphate are Syria Indonesia Egypt Brazil Israel Jordon South Africa

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WORLD PRODUCTION '2007 UNITED STATES AUSTRALIA BRAZIL CANADA CHINA EGYPT ISRAEL JORDON MOROCCO RUSSIA SENEGAL SOUTH AFRICA SYRIA TOGO TUNISIA OTHER COUNTRIES

UNITED STATES In 2006, US marketable rock phosphate production and reported usage dropped to their lowest points since 1965. Production was 30.1 million metric tons (Mt) compared to 36.1 Mt in 2005. This is due to the closure of one mine situated in US. CHINA China is the leading producer of rock phosphate; however the United States remained the worlds leading consumer and importer of rock phosphate. The production of rock

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phosphate in china in 2006 was 30,700 thousand tonnes which increased to 35000 in 2007.

The data can be summarized in the following table:

COUNTRY UNITED STATES AUSTRALIA BRAZIL CANADA CHINA EGYPT ISRAEL JORDON MOROCCO RUSSIA SENEGAL SOUTH AFRICA SYRIA TOGO TUNISIA OTHER COUNTRIES TOTAL

2006 30100 2300 5800 550 30700 2200 2950 5870 27000 11000 600 2600 3850 1000 8000 7740 142000

2007 29700 2200 6000 500 35000 2300 3000 5700 28000 11000 800 2700 3800 1000 7700 8000 147000

We can clearly see by the following line graph that, the production in 2006 and 2007 has almost been the same with minute differences in some cases:

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W O R L D P R O D U C T IO N
40000 35000 30000 25000 20000 15000 10000 5000 0
ST AU ATE ST S RA LI BR A AZ CA IL NA DA CH IN EG A YP ISR T A JO EL R MO DON RO CC O RU SS S SO ENE IA UT GA H AF L RI CA SY RI A TO OT G HE TU O R NI CO SIA UN TR IES

QUANTITY

2006 2007

UN IT E D

C O U N TR Y

After we have taken a look at the production on other countries, now we will look into how much these countries export to India.

Imports of rock phosphate by India from 1998 to 2006 is given below:

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COUNTRY CHINA JORDAN MOROCCO NAURU SENEGAL ALGERIA EGYPT TOGO S.AFRICA SYRIA ISRAEL

1998 20 1224 403 76 347 NIL 72 19 144 303 182

1999 244 1753 216 136 469 NIL 62 NIL 183 188 93

2000 1175 1924 270 112 313 NIL 158 33 196 99 34

2001 1964 1963 138 103 353 NIL 101 14 137 48 113

2002 783 2524 628 63 320 NIL 343 204 49 14 16

2003 431 1713 699 89 33 NIL 191 411 12 NIL NIL

2004 385 2516 976 22 26 NIL 572 348 NIL NIL NIL

2005 137 2301 1134 NIL NIL 143 428 673 NIL NIL NIL

2006 NIL 2334 1272 NIL NIL 367 511 718 NIL NIL 120

(The above values are in thousand tonnes)

If we look at each country separately and compare them on the basis of the quantity imported over the years, we will get the following graphs:

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CHINA'S IMPORTS 2500 2000 1500 CHINA'S IMPORTS 1000 500 0

19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06

QUANTITY in thousand tonnes

YEAR

We see that the imports from China have been on the diminishing side and became completely zero in 2006. Since the imports have been decreasing over the years, China does not seem to be a good option. However its production is the largest in the world. So we cannot ignore that fact.

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JORDON 3000 QUANTITY in thousand tonnes 2500 2000 1500 1000 500 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 YEAR JORDON

The imports from Jordon have been both increasing and decreasing over the years. Since it has been increasing in the last two years, we can consider Jordon to be an option but it is not definite whether it will help or not.

MOROCCO 1400 1200 1000 800 600 400 200 0

19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06

QUANTITY in thousand tonnes

MOROCCO

YEAR

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There is a sharp increasing pattern in the imports of rock phosphate from Morocco; therefore this country must definitely be explored for rock phosphate. It may help India fulfill its need for the fertilizer. Besides, Morocco ranks third in the world production of rock phosphate. There are large reserves of the said fertilizer in Morocco.

NAURU 160 QUANTITY in thousand tonnes 140 120 100 80 60 40 20 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 YEAR NAURU

We can clearly observe, in the above graph, a declining pattern in the imports from Nauru. Since 2 years, no rock phosphate has been imported from Nauru.

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SENEGAL 500 QUANTITY in thousand tonnes 450 400 350 300 250 200 150 100 50 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 YEAR SENEGAL

Similarly, the imports from Senegal in the period from 2002 have taken a steep decrease.

ALGERIA 400 QUANTITY in thousand tonnes 350 300 250 200 150 100 50 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 YEAR ALGERIA

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However find it comes to Algeria, which started its exports to India only in 2005, nothing much can be said about this country. We can try the imports from here as after 2005, the imports have been increasing quietly sharply. Infact, it increased by almost 2.5 times the exports in 2005. Maybe the increasing trend continues over the years.

EGYPT 700 QUANTITY in thousand tonnes 600 500 400 300 200 100 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 YEAR EGYPT

Egypt has been quite unpredictable with its exports to India. There has been a sharp increase and a sharp decrease every consecutive year. But Egypt has large number of reserves.

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TOGO 800 QUANTITY in thousand tonnes 700 600 500 400 300 200 100 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 YEAR TOGO

Togo has shown a remarkable increase in the export of rock phosphate to India over the years. Though the production of rock phosphate in Togo isnt very high, but maybe India is one of the biggest importers of rock phosphate and the trend may continue in future.

SOUTH AFRICA 250 200 150 SOUTH AFRICA 100 50 0

19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06

QUANTITY in thousand tonnes

YEAR

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Though South Africa has got considerable production of rock phosphate, the export to India has taken a declining slope. Infact, it has been completely zero since the past 4 years.

SYRIA 350 300 250 200 150 100 50 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 YEAR SYRIA

Syria again has been showing a consistent decline in the export of rock phosphate to India. Since 2003, the value has been zero.

QUANTITY in thousand tonnes

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ISRAEL 200 180 160 140 120 100 80 60 40 20 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 YEAR ISRAEL

The exports from Israel to India have suddenly risen after 2005 after a deep decline over the past few years. Thus the import from Israel is likely to increase

QUANTITY in thousand tonnes

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SWOT ANALYSIS
(with respect to the fertilizer industry of MMTC)

STRENGTHS

Wide network of sales offices spread all over India . It has offices in all the major Indian cities and also has operations in all the major Indian Ports. Flexibility in order acceptance. It can cater to any kind of order size according to the requirements of the customer. There is no maximum limit on the size of order acceptance. No shortage of funds. Since MMTC is a large company which is financed by the government of India, there are no shortage of funds for it to import large quantities of rock phosphate Large number of buyers and suppliers. Because MMTC is a trading house it can attract a large number of buyers and sellers and hence will lead to an increase in its market share. Low price, low cost. Once MMTC has a large number of buyers and sellers, it can buy rock phosphate at a much cheaper rate as compared to other individual buyers.

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Also, other costs, such as shipment cost, etc will also be lower. WEAKNESS

Lack of proactive approach. After decanalization of rock phosphate, MMTC abruptly stopped the import of rock phosphate fearing that it will lose majority of its market share. It chose not to keep up to the growing demand. Limited contact. Since, MMTC has not been into the business of rock phosphate after 1991, it no longer has full details, proper contacts. There is a drastic change in the scenario which existed in 1991 and the present scenario.

OPPORTUNITIES With the growing demand of rock phosphate in India, MMTC has a lot of opportunities to have access to more markets in other countries and hence increase its profits and revenue. THREATS

Shift to organic foods as fertilizer. Many NGOs these days are inspiring farmers to use organic foods as fertilizers. If this happens then MMTC will loose its business and may hence have to suffer losses.

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CONCLUSION
Keeping in mind, all that we have analyzed so far, we can conclude the following: The imports from Morocco have gone up tremendously over the years along with the fact that Morocco is one of the largest producers of rock phosphate; therefore, it is a favourable destination for importing rock phosphate with respect to Indias demand. Since, the imports from Togo has also gone up remarkably even though its production isnt very high, it means that majority of Togos rock phosphate is exported to India. So, Togo is an excellent place to start with. Algeria is one country which has recently started exporting to India and that too in large quantities. So, Algeria can also be taken into consideration. Imports from Jordon, Egypt and Israel have experienced an alternate upward and downward shift. As a result, nothing concrete can be said about these three countries. However, there is no harm in importing from these 3 countries.

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 Even when China is the biggest producer of rock phosphate, its exports to India have gone down drastically. Reasons behind this have to be well understood to start the imports from the biggest producers of rock phosphate. Since India and China are on good terms with each other politically, it is necessary to continue this relationship for the benefit of our country. With United States being the second largest producer of rock phosphate, India does not import from that country. One reason behind this can be that there is a huge distance gap between India and US. However, this cannot be the only reason because India does import some other items from US. However, the large reserves of US cannot be ignored. These were some of the conclusions which could be understood by the analysis done in this project.

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RECOMMENDATIONS
Since, rock phosphate is an essential fertilizer in a

agriculture dominated country like India; MMTC must start its imports as soon as possible. MMTC is the largest international trading company of India. It has a vast international network. However it does not produce rock phosphate. Following are the strategies which can be adopted by MMTC: INTEGRATED PLAYER It would be highly fruitful for India as well as for the company to produce rock phosphate within our country. If MMTC becomes an integrated player, then it can produce rock phosphate at a much cheaper rate which will be beneficial both for the company and for the economy of India. By integrated player, we mean that MMTC should be present in all aspects of this business namely exploration, mining, production and finally marketing of rock phosphate.

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Since MMTC is a trading company, it has a good marketing capability. However, it does not have any control over any other activities regarding rock phosphate.

INVESTMENT IN PRODUCTION PLANTS Previously, in the report, we have seen that the production of rock phosphate is mainly in the regions of Rajasthan, Madhya Pradesh and Uttar Pradesh. MMTC can very easily make an investment in producing rock phosphate. This can be done in the following ways: 1) Set up a plant 2) Acquire an already existing plant 3) Have a stake in the plant as a promoter or as a joint venture MMTC can think of setting up a plant in India or abroad on its own. In India, if it wants to set up a plant then it needs to make huge investments. It can raise money using the goodwill and its reputation as an internationally renowned trading company. However it will take a lot of time to set up a plant. Acquiring an already existing plant is a feasible option available to MMTC so that they can have a stake in the

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production activities. The acquisition could be in India or in abroad. After the decanalization of rock phosphate in India, a large number of small players came into the picture. MMTC can acquire 1-2 such players in this segment. The third way to be in production is as that of a promoter or joint venture partners. This purpose can be achieved by MMTC if it becomes partner for an upcoming project by an existing player or be a partner to its expansion. It can give financial aid to an already existing company in the form of a joint venture. MMTC already has joint ventures with big names such as TATA steel, in their metal business. Also they have entered into joint ventures for the import of jewellery. As far as fertilizers are concerned, MMTC can enter into joint ventures with companies in Morocco and Tunisia. These companies are high in the production of rock phosphate. LONG TERM CONTRACTS WITH BUYERS MMTC should try to go into long-term contracts with its buyers. This will ensure business in adverse times. MMTC can enter into contracts with their already existing reliable buyers in India itself. Since they take advance payment from their buyers, the latter are already bound by the order they

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place. Once they enter into contract, it will benefit both the buyer as well as MMTC.

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ANNEXURE I LETTER OF CREDIT

To: Bills Department Date :

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Subject to the General Commercial Agreement or the Standard Terms for Banking Facilities (2007 Edition) / Standard Terms for Trade Related Services (2007 Edition) (as the case may be) previously signed and delivered by us to you, we hereby request you to amend the under-mentioned Letter of Guarantee / Standby Letter of Credit in the following terms and conditions and dispatch by the following means marked :
Full teletransmission Courier Registered airmail Pick up at counter

Letter of Guarantee No.: Standby Letter of Credit No.: in favour of Increase/Decrease the amount by New Expiry Date : Other amendments not included above:to

Amount : Amount : in all

All other terms and conditions remain unchanged Banking Charges: All charges incurred under this amendment are for our account, please debit all charges from our current account or
(Please specify)

All charges incurred under this amendment are for account of the Beneficiary If there are any queries, please contact Mr./Ms. at Tel No. Fax No.

S.V.

69
Authorized Signature(s) & Company Chop

ANNEXURE - II APPLICATION FOR AMENDMENT TO L/C AMENDMENT TO LETTER OF CREDIT

KINDLY TYPE ALL INFORMATION

APPLICATION FOR AMENDMENT TO: IRREVOCABLE COMMERCIAL LETTER OF CREDIT IRREVOCABLE STANDBY LETTER OF CREDIT DATE: _____________________ Attention: Letter of Credit Department Reference is made to your letter of credit # ________________________our reference # ___________________ 70

In favor of _______________________________________________ Original value ____________________________________________. Kindly increase by $ ________________________________________ covering additional shipment of_______________________________ ________________________________________________________ ________________________________________________________ Extended shipment date to __________________________________ Extended expiration date to __________________________________ Other changes ____________________________________________ ________________________________________________________ ________________________________________________________ ________________________________________________________ ________________________________________________________ ________________________________________________________ ________________________________________________________ Amendment to be Airmailed Cabled
(BENEFICIARY)

All other terms and conditions remain unchanged.

APPROVED FOR BANK USE ONLY

SIGNATURE APPLICANT ADDRESS CITY PRINT NAME

Very truly yours

STATE

`ZIP CODE

AUTHORIZED SIGNATURE ON FILE

OUR ACCOUNT NUMBER

71

ANNEXURE III CERTIFICATE OF ORIGIN

1. Goods consigned from (Exporters business, name, address, country)

Reference No. (Combined declaration and certificate) Issued in

(country)

(see notes overleaf) 2. Goods consigned to (Consignees name, address, country) 3. Means of transport and route (as far as known) 5. Tariff 6. Marks and 7. Number and Item numbers of kind of Number packages packages; description of goods 4. For Official Use

8. Origin Criterion (see notes overleaf)

9. Gross weight or other quantity)

10. Number and date of invoice

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11. Declaration by the exporter: The undersigned hereby declares that the above details and statements are correct; that all the goods were produced in ................
(country)

Certificate: It is hereby certified, on the basis of control carried out hat the declaration by the exporter is correct.

and that they comply with the origin requirements specified for goods exported to ...
(importing country)

...
Place and date, signature of the authorized signatory

. Place and date, signature and stamp of certifying authority

ANNEXURE IV FOREIGN EXCHANGE EARNINGS AND OUTGO

EARNINGS

OUTGO

Rs. In Million

$ million

Rs. In Million

$ Million

EXPORTS

34342

758.54

IMPORTS

184360

4072.11

OTHERS

27

0.6

INTEREST

61

1.35

OTHERS

25

0.55

73

TOTAL

34369

759.14

TOTAL

184446

4074.01

Source: Fertilizer Statistics 2006-2007, Fertilizer Association of India

ANNEXURE V MARKET PRICE DATA

MONTH
APRIL(2006) JULY(2006) AUGUST(2006) SEPTEMBER(2006) OCTOBER(2006) NOVEMBER (2006) DECEMBER(2006) JANUARY(2007)

LOW (Rs.)
531.1 764.75 167 2389 2250 2000 1831 2166

HIGH (Rs.)
637.3 2337.7 2700 2707.7 2740 2700 2394 2599

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FEBRUARY(2007) MARCH(2007)

2013 2031.05

2600 2736

Source: Fertilizer Statistics 2006-2007, Fertilizer Association of India

BIBLIOGRAPHY
www.mmtclimited.com Custom Tariff of India (2007-08), 43rd Edition,

by

R.K.Jain.
www.elwataneya.com www.phosphatefertilizer.com http://www.ec21.com/ec-market/rock_phosphate.html http://www.psranawat.org/non_metalic/rock.htm

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 Fertilizer

Statistics

2006-2007,

52nd

Edition,

the

Fertilizer Association of India.

http://minerals.usgs.gov/minerals/pubs/commodity/ph

osphate_rock/mcs-2008-phosp.pdf.
http://www.mapsofworld.com/minerals/world-rock-

phosphate-producers.html
http://www.indiandata.com/import_procedures.html#1

1
http://fieo.org/origin.html

Finance of International Trade in Gulf, By Ahmed AlSuwaidi Export-Import Theory, Practices and Procedures: By Belay Seyoum

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