Fewer flowers may head overseas as fuel costs rise, subsidy goes

Fewer flowers may head overseas as fuel costs rise, subsidy goes

Flower exports from India are likely to be hit because of rising air freight costs and withdrawal of freight subsidy, even as exporters combat a rupee appreciating against the dollar.

Oil companies had hiked jet fuel prices by 4.2% on 1 October and most airlines have passed on the cost to passengers and freight. Largely as a result, floriculture exports from India will see a growth of only around 15-20% this year, according to the South India Floriculture Association, compared with a 26% growth in the previous year.

Starting from Christmas through Valentine’s Day on 14 February, is the busiest two-month period for Indian flower exporters, when 70% of the year’s exports are airlifted. Air freight works out to nearly half the wholesale price that Indian roses, for example, are sold at overseas.

A November Agricultural and Processed Food Products Export Development Authority report notes that air freight from African destinations, such as Ethiopia and Kenya, the main competitors to Indian floricultural exporters, to European markets is at $1.60 (Rs63) a kg, while it costs $3 a kg from India.

Indian exports for the year ending March were valued at Rs380 crore, according to the authority. Indian flower exports, however, constitute only 0.18% of the international trade in flowers.

Meanwhile, the Indian government had also stopped subsidizing air freight for floricultural exports since March. Until then, exporters could avail a subsidy of Rs25 per kg on fresh-cut flowers exported to Europe, Japan and West Asia.

“The margins of cut flowers this year would be a little less than the previous year,’’ concedes R.D. Reddy, a member of the association’s working committee, who is also managing director of Meghna Floritech Ltd.

A majority of the Indian cut- flower exports come from Karnataka, Tamil Nadu and Maharashtra.

“Growth may be around 10-20% this year, but the prices that our flowers command will be the same as previous years," says K.V.L.N. Raju, another Bangalore-based exporter, who runs Nagarjuna Agritech Ltd.

“We are having stiff competition from African countries, which have now started exporting to the Middle East as well," said the authority’s assistant general manager in Bangalore R. Ravindra. However, a few exporters from India also own units in Ethiopia and Kenya.

To combat the double impact of the depreciating dollar and increasing air freight charges, Indian players are increasingly targeting West Asia and Australia.