SUMMER TRAINING REPORTON

MMTC LimitedIMPORT OF ROCK PHOSPHATE

Submitted in partial fulfillments of the requirements ofPost Graduate Diploma in Business Management Programme

By:

CHANDNI JAIN 2007-09

(FT-07-540)

2

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 in-

depth 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.

3

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

4

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

5

the import of rock phosphate was decanalized under Mr.

ManMohan Singh as the finance Minister.

6

TABLE OF CONTENTS

Part 1: COMPANY INTRODUCTION

1.1 About the company………………………………………………10

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-I………………………………………………………………………68

7

Annexure-II…………………………………………………………………….70

Annexure-III.………………………………………………………………….72

Annexure-IV……………………………………………………………………73

Annexure-V…………………………………………………………………….74

Bibliography…………………………………………………………………...75

8

COMPANY

INTRODUCTION

ABOUT THE COMPANY

9

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

10

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 company’s activities.

VIGILANCE

11

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, directors, employees, suppliers,

customers or the community in general. The company is

committed to continuous development, adoption and

dedication towards the best corporate governance practices.

OWNERSHIP PATTERN

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 Category No. of shares held Percentage of shareholding

1 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

3,31,535 0.66%

3 Other Bodies Corporate 325 0.00%

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

2,540 0.01%

 Total 5,00,00,000 100%

FINANCIAL PROFILE

13

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:-

    (Rs in million)  2006-07 2005-06Exports 34131 29254

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Imports 186074 117858Domestic 12811 16512Other trading Earnings 445 310Net Sales/ Trading Earnings 233461 163934Trading profit 2497 2218Profit Before Taxes 1893 1679Profit After taxes 1268 1083Dividends     (i) Interim Dividend on Equity Shares 125 125 (ii) Proposed Dividend 123 125 (iii) Dividend Tax 39 35Reserves and Surplus 8321 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 MMTC’s 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

fertilizer trade, which is dependent on various factors like

monsoon, Govt. policy etc, this wealth of domain knowledge

15

and relationships shall be the prime factor for group’s

growth in future.

The consumption of fertilizers is growing in India leading to

increased shortfall between consumption vis-à-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.

PRODUCTS

MINERALS

16

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. MMTC’s mineral sales are on FOB basis

only.

MMTC Limited, India’s first Super Star Trading House

continues to be the country’s leader in mineral exports for

four decades now. During the last decade, MMTC could

withstand the stiff competition in the world market but its

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.

17

PRECIOUS METALS

MMTC Ltd. is India’s 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. MMTC’s

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.

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 MMTC’s service

charges etc. Gold would be delivered to an authorized

18

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. - India’s 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. MMTC’s share of imports in

India’s import of refined non-ferrous metals in terms of value

is about 20%

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%)

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Zinc Ingots Spl. HG (min 99.995%) Lead Ingots (min.

99.97%) Tin (min. 99.85% purity) Nickel min 99.80%

purity) (Squares 4”X4”, 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.

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

20

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.

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

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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 world’s 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

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

22

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) Wheat

2) Rice

3) Maize

4) Soyabean Meal

5) Sugar

6) Edible Oil

7) Pulses

COMPETITORS

The State Trading Corporation of India Ltd. (STC)

23

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 and

assisting them to enhance prosperity has been the driving

force behind IPL’s sales promotion and extension activities.

24

PROJECT

25

ROCK

PHOSPHATE

STATEMENT OF PROBLEM

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

26

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

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.

27

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

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.

28

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.

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.

29

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 guarantee bonds: Exports are

sometimes called upon to execute bonds duly

guaranteed by the bank. The exporter has to furnish

bank guarantees to MMTC to ensure due

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

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.

30

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.

Certificate of inspection: This is a

certificate declaring the result of an

examination of the goods by a

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.

31

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 MMTC’s 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.

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%

32

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%

Barring Custom duty, all other taxes levied on the goods

entering India are constant.

33

MODES OF PAYMENT

The rapid growth and expansion in the global trade cannot

be sustained without efficient and timely payment

arrangements. Nonpayment or delays in payment for

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

34

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

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

35

documentary credit, documentary letter of credit or simply

as credit.

Refer to annexure for a draft of L/C.

DISCREPANCIES: Discrepancies occur when documents

submitted contain language or terms different fro the letter

of credit or some other apparent irregularity. Most

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.

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.

36

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, or expiration of L/C. However other major

discrepancies can be corrected by the amendment of the

L/C.

AMENDMENT OF L/C: (ANNEXURE II) Amendment requires

the approval of the issuing bank the confirming bank (in 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.

37

ANALYSIS

38

DEMAND & PRODUCTION

The following table depicts the demand of rock phosphate (In

thousand tones) in India from 1990-2007.

YEAR DEMAND('000 TONNES)

   

1990-91 3221

1991-92 3321.2

1992-93 2843.8

1993-94 2669.3

1994-95 2931.7

1995-96 2897.5

1996-97 2976.8

1997-98 3913.6

1998-99 4112.2

1999-2000 4797.9

2000-01 4214.6

2001-02 4382.4

2002-03 4018.8

2003-04 4124.3

2004-05 4623.8

2005-06 5203.7

2006-07 5543.3

The drive into biofuels production by countries is pushing the

demand for rock phosphate.

39

The increasing demand for this fertilizer can be easily seen

by the following chart

DEMNAD

0

1000

2000

3000

4000

5000

6000

1990

-91

1992

-93

1994

-95

1996

-97

1998

-99

2000

-01

2002

-03

2004

-05

2006

-07

YEAR

DE

MA

ND

( in

th

ou

san

d t

on

nes

)

Series1

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:

40

1) RAJASTHAN

Jhamarkotra

Maton, distt. Udaipur

Kanpur, distt. Udaipur

2) MADHYA PRADESH

Katamba distt. Jhabua

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 QUANTITY('000 TONNES)   1990-91 5841991-92 477.61992-93 372.71993-94 361.11994-95 483.71995-96 513.21996-97 509.91997-98 613.2

41

1998-99 610.51999-2000 565.22000-01 438.82001-02 400.72002-03 385.22003-04 406.92004-05 393.82005-06 447.22006-07 475.5

PRODUCTION

0

100

200

300

400

500

600

700

1990

-91

1992

-93

1994

-95

1996

-97

1998

-99

2000

-01

2002

-03

2004

-05

2006

-07

YEAR

QU

AN

TIT

Y in

th

ou

sa

nd

to

nn

es

PRODUCTION

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.

42

DEMAND Vs PRODUCTION

0

1000

2000

3000

4000

5000

6000

1990

-91

1991

-92

1992

-93

1993

-94

1994

-95

1995

-96

1996

-97

1997

-98

1998

-99

1999

-200

0

2000

-01

2001

-02

2002

-03

2003

-04

2004

-05

2005

-06

2006

-07

YEAR

QU

AN

TIT

Y i

n t

ho

usa

nd

to

nn

es

DEMAND

PRODUCTION

Though the production has started growing since 2004 but it

has not been able to meet the growing demands of this

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:

YEAR QUANTITY( '000

43

TONNES)

   

2008-09 6380

2009-10 6680

2010-11 6980

2011-12 7290

PROJECTION OF DEMAND

5800

6000

6200

6400

6600

6800

7000

7200

7400

2008-09 2009-10 2010-11 2011-12

YEAR

QU

AN

TIT

Y i

n t

ho

usa

nd

to

nn

es

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.

44

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

45

Tunisia

The other producers of rock phosphate are

Syria

Indonesia

Egypt

Brazil

Israel

Jordon

South Africa

46

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 world’s leading consumer

and importer of rock phosphate. The production of rock

47

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 2006 2007

     

UNITED STATES 30100 29700

AUSTRALIA 2300 2200

BRAZIL 5800 6000

CANADA 550 500

CHINA 30700 35000

EGYPT 2200 2300

ISRAEL 2950 3000

JORDON 5870 5700

MOROCCO 27000 28000

RUSSIA 11000 11000

SENEGAL 600 800

SOUTH AFRICA 2600 2700

SYRIA 3850 3800

TOGO 1000 1000

TUNISIA 8000 7700

OTHER COUNTRIES 7740 8000

TOTAL 142000 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:

48

WORLD PRODUCTION

05000

10000150002000025000300003500040000

COUNTRY

QUA

NTIT

Y 2006

2007

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:

49

COUNTRY 1998 1999 2000 2001 2002 2003 2004 2005 2006

                   

CHINA 20 244 1175 1964 783 431 385 137 NIL

JORDAN 1224 1753 1924 1963 2524 1713 2516 2301 2334

MOROCCO 403 216 270 138 628 699 976 1134 1272

NAURU 76 136 112 103 63 89 22 NIL NIL

SENEGAL 347 469 313 353 320 33 26 NIL NIL

ALGERIA NIL NIL NIL NIL NIL NIL NIL 143 367

EGYPT 72 62 158 101 343 191 572 428 511

TOGO 19 NIL 33 14 204 411 348 673 718

S.AFRICA 144 183 196 137 49 12 NIL NIL NIL

SYRIA 303 188 99 48 14 NIL NIL NIL NIL

ISRAEL 182 93 34 113 16 NIL 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:

50

CHINA'S IMPORTS

0

500

1000

1500

2000

2500

1998

1999

2000

2001

2002

2003

2004

2005

2006

YEAR

QU

AN

TIT

Y in

th

ou

san

d t

on

nes

CHINA'S IMPORTS

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.

51

JORDON

0

500

1000

1500

2000

2500

3000

1998 1999 2000 2001 2002 2003 2004 2005 2006

YEAR

QU

AN

TIT

Y in

th

ou

san

d t

on

nes

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

0

200

400

600

800

1000

1200

1400

1998

1999

2000

2001

2002

2003

2004

2005

2006

YEAR

QU

AN

TIT

Y in

th

ou

san

d t

on

nes

MOROCCO

52

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

0

20

40

60

80

100

120

140

160

1998 1999 2000 2001 2002 2003 2004 2005 2006

YEAR

QU

AN

TIT

Y in

th

ou

san

d t

on

nes

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.

53

SENEGAL

0

50

100

150

200

250

300

350

400

450

500

1998 1999 2000 2001 2002 2003 2004 2005 2006

YEAR

QU

AN

TIT

Y in

th

ou

san

d t

on

nes

SENEGAL

Similarly, the imports from Senegal in the period from 2002

have taken a steep decrease.

ALGERIA

0

50

100

150

200

250

300

350

400

1998 1999 2000 2001 2002 2003 2004 2005 2006

YEAR

QU

AN

TIT

Y in

th

ou

san

d t

on

nes

ALGERIA

54

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

0

100

200

300

400

500

600

700

1998 1999 2000 2001 2002 2003 2004 2005 2006

YEAR

QU

AN

TIT

Y in

th

ou

san

d t

on

nes

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.

55

TOGO

0

100

200

300

400

500

600

700

800

1998 1999 2000 2001 2002 2003 2004 2005 2006

YEAR

QU

AN

TIT

Y in

th

ou

san

d t

on

nes

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 isn’t very high, but maybe India is

one of the biggest importers of rock phosphate and the trend

may continue in future.

SOUTH AFRICA

0

50

100

150

200

250

1998

1999

2000

2001

2002

2003

2004

2005

2006

YEAR

QU

AN

TIT

Y in

th

ou

san

d t

on

nes

SOUTH AFRICA

56

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

0

50

100

150

200

250

300

350

1998 1999 2000 2001 2002 2003 2004 2005 2006

YEAR

QU

AN

TIT

Y in

th

ou

san

d t

on

nes

SYRIA

Syria again has been showing a consistent decline in the

export of rock phosphate to India. Since 2003, the value has

been zero.

57

ISRAEL

0

20

40

60

80

100

120

140

160

180

200

1998 1999 2000 2001 2002 2003 2004 2005 2006

YEAR

QU

AN

TIT

Y in

th

ou

san

d t

on

nes

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

58

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.

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

lower.

59

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.

CONCLUSION

60

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 India’s demand.

Since, the imports from Togo has also gone up

remarkably even though its production isn’t very high,

it means that majority of Togo’s 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.

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

61

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.

RECOMMENDATIONS

62

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.

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,

63

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

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

64

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

place. Once they enter into contract, it will benefit both the

buyer as well as MMTC.

65

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To: Bills Department

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66

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67

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68

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69

ANNEXURE IIICERTIFICATE OF ORIGIN

1. Goods consigned from(Exporter’s business, name, address, country)

Reference No.(Combined declaration and certificate)Issued in……………………………………… (country)

(see notes overleaf)2. Goods consigned to (Consignee’s name, address, country)…………………

4. For Official Use

3. Means of transport and route(as far as known)……………………

5. Tariff Item

Number

6. Marks and numbers of packages

7. Number and kind of packages; description of goods

8. Origin Criterion (see notes overleaf)

9. Gross weight or other quantity)

10. Number and date of invoice

70

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)and that they comply with the origin requirements specified for goods exported to ………………………………………………... (importing country)………………………………………………... Place and date, signature of the authorized signatory

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

………………………………………………………………….Place and date, signature and stamp of certifying authority

ANNEXURE IVFOREIGN 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

71

TOTAL 34369 759.14 TOTAL 184446 4074.01

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

ANNEXURE VMARKET PRICE DATA

MONTH LOW (Rs.) HIGH (Rs.)

APRIL(2006) 531.1 637.3

JULY(2006) 764.75 2337.7

AUGUST(2006) 167 2700

SEPTEMBER(2006) 2389 2707.7

OCTOBER(2006) 2250 2740

NOVEMBER (2006) 2000 2700

DECEMBER(2006) 1831 2394

JANUARY(2007) 2166 2599

72

FEBRUARY(2007) 2013 2600

MARCH(2007) 2031.05 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

73

Fertilizer Statistics 2006-2007, 52nd Edition, the

Fertilizer Association of India.

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

phosphate_rock/mcs-2008-phosp.pdf.

http://www.mapsofworld.com/minerals/world-rock-

phosphate-producers.html

http://www.indiandata.com/import_procedures.html#11

http://fieo.org/origin.html

Finance of International Trade in Gulf, By Ahmed Al-

Suwaidi

Export-Import Theory, Practices and Procedures: By

Belay Seyoum

74