IN avoidance of a hefty 30 per cent tariff on imported food products, rebranded Australian sheepmeat is being smuggled into India via the Middle East.
Relaxing religious taboos in the predominantly Hindu country among young people has stimulated an increase in demand for red meat in recent years.
“The big barrier for Australia is the 30pc tariff – it is killing us,” Meat and Livestock Australia’s regional manager of southern Asia, Andrew Simpson said.
“The same product can go to the Middle East with a zero tariff, reformatted, and come across to India and bypass that 30pc on-cost.
“The (export) pipeline traffic is going to the Middle East, absolutely, and coming back into India reformed (rebranded), for both Australia and New Zealand lamb.”
Despite the trade barrier, Mr Simpson said it was a country worth watching with the 1.4billion population offering market opportunities as big as Australia’s China trade.
India’s economy grew by an estimated 7.5pc last year, with Australian Bureau of Agricultural and Resource Economics (ABARES) forecasting the same growth this year.
In early November 2016, as part of an initiative to tackle corruption and criminal activity, the Indian Government announced two large banknotes were no longer legal currency, representing 86pc of all cash in circulation.
The corruption crackdown impacted the purchases of goods in late 2016 and early 2017.
However, ABARES reported India’s economic growth would be supported by ongoing policy reforms aimed at improving the ease of doing business and reducing corruption.
“India is a massive market, but it is a long-term horizon,” Mr Simpson said.
“Young Indians love food… beef toppings on pizza (is available), Subway now has beef, pork and chicken (on sale).
“It is telling us there are not as many restrictions or religious taboos that were yesteryear.”
An Australia-India trade deal has been in negotiations since 2011, and while Andrew Robb, former Minister of Trade and Investment looked close to securing one in 2015, negotiations dissipated last year.
Until a trade deal was done, Mr Simpson said MLA would be access, not market focused on India.
“We are very fortunate as a country to get China, Korea and Japan (free trade agreements),” he said.
“We’ve got a lot of work going on in the Middle East, so we can’t have the expectation that all countries are going to give away an FTA, because it is a bilateral process…. it is not necessarily going to be in the favour of our meat industries.”
And a trade deal isn’t the only barrier.
Sheepmeat sells for about 400 cents a kilogram on the wet market in India, more than 200c/kg cheaper than Australia’s current trade lamb average. While chicken meat sells for about 100c/kg.
“There are other markets that are taking lamb at a premium and I think that product deserves to be going to premium markets - we shouldn’t be discounting it just to get an entry basis,” he said.
But long-term, Mr Simpson is optimistic.
“I saw China 10 years out, and I see India as a long-term opportunity,” he said.
“There will be a build-up that the industry needs to provide… and ultimately we will lead trade delegations across but it is going to be a slow market build.
“Let’s be realistic in our expectations.”