Irkutsk
Ulan-Ude

Blagoveshchensk
Chita
Yakutsk

Birobidzhan
Vladivostok
Khabarovsk

Magadan
Yuzhno-Sakhalinsk

Anadyr
Petropavlovsk-
Kamchatsky
Moscow

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Indian hike

Far East is considered as a profitable territory for cooperation

Foreign Investor Day was held in Vladivostok - the Russian-Indian forum, the purpose of which should be to prepare favorable ground for establishing business contacts between representatives of Russia and India at the next Eastern Economic Forum. The arrival of a representative delegation (almost 200 headed by the Minister of Trade and Industry of the country Piyush Goyal, as well as the governors of four states) to Vladivostok testifies to India's intention to expand the range of counterparties beyond governments and state corporations, including regional authorities and business.

Indian hike
Photo: the press service of the Primorsky Territory Administration

The colorful Indian delegation, in which women flashed in saris and Sikhs in red turbans, included representatives of the states of Haryana, Goa, Gujarat and Uttar Pradesh: government officials, managers of several dozen energy, industrial and agricultural companies with a total revenue of 400 billion dollars, representatives universities and other participants. The Far Eastern Federal District was represented by the heads and delegations of all subjects of the Far Eastern Federal District of approximately the same motley composition. The organizers - the Far East Investment Promotion and Export Development Agency (IPA) - until the last moment changed the program of the forum, as a result, it began not with a plenary meeting, but with industry sessions devoted to energy, timber processing, diamonds, coal, education, agriculture, health and tourism.


Unexpected india

India is a new global player in terms of population (1,3 billion people), economic indicators (GDP - three trillion dollars, plans to increase to five trillion dollars) and the development potential coming on the heels of mighty China. It is the fastest growing economy in the world with a high proportion of young people (25-50 years) and the highest rates of attracting foreign direct investment in the world (37,8 billion dollars in 2018 year) due to the promotion of special conditions for investors. The country's competitive advantages - total English-speaking population, the presence of a Westernized management system and democratic institutions, installed by the British, as well as a bet on high technology - as you know, Indians have the status of world IT outsourcers and global pharmaceutical manufacturers.

For Russia, India is a much more convenient partner than China itself: there are no territorial claims and historical conflicts between the countries, but there is a good memory of Soviet assistance in the 1960-70 years. Finally, Russia is not afraid of becoming the “raw materials appendage” of India and perceives it not as a senior, but as an equal partner.

In general, the expansion of contacts with India is quite consistent with the strategy of "turning to the East" and the withdrawal of Asian states from the millennia-old "civilizational shadow" indicated in Valdai Club recent report. At the same time, Russia has something to learn from India: for example, the Indians have long and successfully integrated into the global intellectual and economic elite - to recall at least metallurgical magnate Mittal. The potential for the development of relations is noted by both the Indian and Russian sides, as well as the fact that until recently cooperation has developed, mainly in the military-industrial complex.

According to the Far East Development Fund, in 2018, Indian imports to Russia amounted to 3,2 billion dollars, of which 27% was taken by chemical products, 19% - machinery and equipment, 11% - agricultural products, 9% - textiles. Russia's exports to India are double, the main part of it is predictably occupied by minerals (25%), engineering products (21%), precious stones and metals (14%).

The head of the Indian delegation, Adityanath Yogi, the Prime Minister of Uttar Pradesh with a population of 220 million people who came to the forum in the orange toga of a Buddhist monk, said that by 2025 the trade turnover between the countries should increase to 30 billion dollars, the volume of Indian investments would increase by a multiple : Until now, its growth has been constrained by the lack of understanding by Indian entrepreneurs of the opportunities for doing business in Russia. Hindus are ready to support the development of the Far East and intend to send a large business mission to the region. Potential areas of cooperation are processing raw materials for deliveries to India and third countries, timber processing, diamond cutting, mining, agricultural products processing, oil and gas projects in the Arctic, joint development of the Northern Sea Route, and construction of ports.

Yogi called the challenge of increasing the productivity of the Far Eastern agro-industry using new technologies a "challenge" and suggested applying Indian milk production and cattle breeding practices in the district. To what extent the Indians are ready to invest in the processing of agricultural products, what the Russian side is interested in - it is not yet known, as well as whether such projects will be aimed at producing products for export to India, which itself is the world's largest producer in agriculture, or for deliveries to local markets. Another area of ​​potential collaboration is the production of diamonds and jewelry.



Carbon

The section on diamonds and non-ferrous metals was moderated by the Chairman of the Government of Yakutia Vladimir Solodov and the Governor of Gujarat, Vijay Rupani, in whose territory the city of Surat with the largest diamond processing enterprise in the world is located (produces 95% of all export diamonds in India). The section attracted great attention of Indian businessmen, as the Indians are one of the leaders in the global diamond industry, holding their positions due to hard dumping in the diamond cutting market. Therefore, Indian companies are vitally interested in accessing cheap rough diamonds ALROSA and lobby for a reduction in them of Russian export duties, which today amount to 25% of the cost of raw materials.

Vladimir Solodov demonstrated diamond production and sales in Yakutia: production increased from 67,8 million in 2016 to 118,8 million in 2018, sales in 2016 amounted to 131,27 million rubles, in 2017 to 142 million rubles. Diamond production increased from 1 211 million rubles in 2016 to 1946 million in 2018, sales - from 1174,5 million rubles in 2016 to 1 858,9 in 2017. The main buyer of exported diamonds is Belgium (2,14 billion dollars), followed by India (0,66 billion dollars), Israel (0,48 billion) and the UAE (0,42 billion) with a wide margin.

Vladimir Solodov invited potential residents to the Kangalassi TOP jewelry cluster and invited representatives of Gujarati jewelry companies to arrive in Yakutia on October 20 to open a diamond cutting cluster, where modern cutting equipment has already been installed, but there are no foreign residents in the TOP yet. The bait for the session participants could be the opportunity to access Russian rough, which is tightly regulated by the monopolist - the ALROSA company: today Yakut diamonds go only to companies that are members of the “Alliance for the Distribution of Raw Materials”, where Gujarati cutters are not included, but since March of this year cluster residents are provided with diamonds by special agreement.

Co-operation in the coal industry also seems promising, since India consumes 970 million tons of coal per year, of which 320 million tons are imported. So far, coal to India comes mainly from Australia, but deliveries can also be carried out from the Russian Far East, where its production is developing rapidly. For example, in Yakutia, coal is mined by Colmar (production in 2018 amounted to 5,5 million tons with a prospect of growth to 23 billion tons) and Mechel (production in 2018 - 4,9 million tons with a growth prospect to 36 million tons). Both companies have access to the ports: Mechel through Posyet, Colmar through Vanino, where in 2020 it plans to launch a new coal terminal. Coal India Limited showed interest in cooperation; it recently visited Yakutia in order to get acquainted with the work of coal companies.

In Chukotka, the main coal producer is TIG (Tigers Realm Coal), which supplies coal (2018 thousand tons were produced in 576), including for export via the Beringovsky port. In the Magadan Region, according to Governor Sergei Nosov, over five billion tons of anthracite, over six billion tons of coal and over 32 billion tons of brown coal have been explored, for the first stage of development which requires 420 million dollars of investments. Some of the deposits are located nearby (by local standards, i.e. hundreds of km) from the ports, but most are located inland. Therefore, although the delegations of Magadan, Kamchatka, Chukotka and Yakutia announced their readiness to deliver up to 28 million tons of coal to India, it is not yet clear how the main part of the cargo from Chukotka, Kamchatka, and Magadan deposits to ports in the absence of a railway will affect its cost.




Energetics

At the energy session, the Indian side presented its country as the third largest global energy consumer (growth of more than 4% per year over the next 25 years), which has the largest energy and refining capacities (249,4 million tons per year). Russia is considered by the Indians as one of the important factors in ensuring its energy security.

In addition to oil, India is interested in increasing gas supplies, as the country has adopted a plan for switching to clean fuel, the implementation of which will double gas demand by the 2025 year, which will require the import of more than 50 million tons of LNG per year. India is currently the fourth largest LNG market in the world (7% of global demand), 80% of its total volume is imported. In addition, Russian investors were invited to participate in the exploration of hydrocarbon deposits (including shale and gas hydrate) in India itself, as well as to enter into regasification projects, oil refining and gas pipelines.

Deputy Minister of Energy of the Russian Federation Anton Inyutsin, in turn, positively assessed the dynamics of Russian energy exports to India: over the 2018 year, oil supplies amounted to 2,3 million tons, oil products - 546 thousand tons (an increase of 7% compared to 2017), coal exports - 4,5 mln tons (an increase of 25%), and stated that it would be nice to involve Russian power engineers in the planned modernization of more than 300 power units from 200 to 300 MW built in India by Soviet specialists and under licenses of Russian manufacturers.

The Russian side sees prospects for expanding the hydrocarbon trade in the participation of Indian companies in Arctic projects: for example, NOVATEK is interested in attracting Indian partners to the Arctic LNG-2 project, as well as in concluding contracts for the supply of LNG from the plant of the same name. NK Rosneft and a consortium of Indian companies, which includes ONGC Videsh ltd. (having 20% in Sakhalin-1), they are discussing the expansion of cooperation on the basis of the Vankor cluster deposits (since 2016, the Indians have owned 49% of this project).

Indian investments in expanding an LNG plant in Sakhalin are considered. Gazprom Neft calls on Indian oil and gas enterprises to jointly search for and develop hydrocarbons on the Russian Arctic shelf. In 2017, Gazprom Neft and ONGC Videsh signed an agreement on the exploration of offshore fields in the Okhotsk and Pechora Seas, and it is currently expected to receive proposals from the Indian company for joining the projects. In addition, India, which is inferior to China and Germany in green energy technologies, but much more advanced than Russia, can share its rich experience in building autonomous solar and wind power plants that will provide electricity to isolated areas of the Far East.


Forest

India is the largest importer of wood from Asian countries, but in recent years, due to the ban on timber harvesting and export, introduced by several countries to protect its forests, supply volumes decreased by 70%. The export of wood products to India from Russia is small, but is growing steadily: according to IPA, in 2018, it amounted to 309 million dollars, mainly in the form of paper.

The Deputy Minister for the Development of the Far East Sergey Tyrtsev at a plenary meeting announced the creation of conditions in the Far Eastern Federal District for the development of deep processing of timber: recently, the Russian government decided to increase the export duty for roundwood. This new increase in round duty rates is unlikely to stop timber exports to the PRC, as the Chinese have long learned to circumvent such barriers, but there are chances that the Indians will create some competition for them in this area.

Nine megaprojects in the Far East forestry sector were presented to the Indians at the “forest” section: Pulp and Paper Mill in the Khabarovsk Territory (six million cubic meters of wood per year), three wood processing projects in Yakutia (total 13,6 million cubic meters), Pulp and Paper Mill and chemical production in the Amur Region (seven million cubic meters), four logging projects in the Trans-Baikal Territory (at 5,9 million cubic meters per year), as well as three projects in Buryatia, including the modernization of the Selenginsky pulp and cardboard mill.



Medicine and a bit of tourism

Another area that interests both parties is medicine. In particular, the head of Medanta Group of Hospitals, Sunil Sachdeva, discussed several start-ups with the head of Buryatia, Alexei Tsydenov, including a laboratory test for the diagnosis of chronic ischemia of the human brain. The company is also interested in the project of creating a network of oncological clinics in the Far East, advanced training programs for Indian doctors at the FEFU School of Biomedicine, and mutual internships for specialists from both countries. At present, many Indian students are studying at the FEFU BWM, since the status of a doctor, in contrast to Russian realities, is very high in India, and training is expensive.

Indians are also interested in the development of tourism: in particular, they are interested in investments in the Far East, including seaside hotels, recreation areas, as well as the participation of Indian tourists on cruises from Vladivostok to Korea and Japan. For the influx of tourists, including business travelers, the guests suggested extending the validity of electronic visas from the current eight days to two to three weeks, which would greatly simplify the visits for businessmen. In addition, the meeting participants considered it important to establish air links between Vladivostok and the capitals of the states represented at the forum.

One of the significant results of the forum can be considered the decision to create an Indian-Yakut film studio: Bollywood - a recognized (at least quantitatively) leader in the global film industry, will enter into a collaboration with an authentic, but actively growing Yakut cinema, to shoot its films in the republic. The results of such co-working, in the presence of a rich imagination, you can try to imagine.

Thus, different subjects of the Far Eastern Federal District received different results from the forum, despite the abundance of memorandums signed as a result, and the familiarization format of the meeting did not imply an abundance of concluded contracts - it was rather a place to present the intentions of the parties. The winners were those whose projects (usually related to the supply of raw materials) were on the wish list of the Indian delegation.

Indians' interest in Far Eastern hydrocarbons is limited by available resources: all the gas that will go through the Power of Siberia has already been bought by China, and it is difficult to say whether they are ready to seriously invest in oil and gas production on the Arctic shelf, given that even from Russian companies there almost no one works. The proposed investment projects for other popular types of raw materials (mainly wood and coal) require large investments not only in production itself, but also in transport and energy infrastructure, which will surely make Indian companies think. Whether the subjects of the Far Eastern Federal District will be able to prepare proposals that suit both sides over the time remaining before the WEF, we will find out very soon.