India and Africa Energy Trade and Development Sector: Major Challenges and Prospects
Dr. Suresh Kumar*
Published in India’s Energy Security: Major Challenges (Special Issues), Vol. II, Issue 33, 1-9 February 2006, ORF Centre for Resources Management.
Introduction
India is the sixth largest energy consumer in the world and is one of the world’s fastest growing consumers. Estimated to be a US $ 90 billion industry, the oil and gas industry is among the largest contributors to the central and state exchequers in India. Its share approximates US $ 13.58 billion. India is promoting the industry through investments, healthy competition and an institutionalized regulatory regime.
Multi-pronged initiatives and actions have been taken by India to address the gap in energy and the non-availability of energy resources. These actions are yielding results in this sector. OIL and Natural Gas Corporation (ONGC) India has ventured into deepwater exploration. It is estimated that there are hydrocarbon reserves worth 1 billion tones of oil equivalent (btoe) in the deepwater of India. The ONGC deepwater exploration programme involves an estimated investment of US $ 0.75 million per day.1 ONGC Videsh has the mandate to invest in overseas are being evaluated by the Government. Companies are aggressively pursuing overseas markets. With over 3 decades of experience in developing countries, Mohan Exports (India) Pvt. Ltd. (MEIPL) has accomplished high caliber project engineering, management, procurement, and project execution and management skills in this sector. MEIPL offers into a well-engineered and constructed project using cost-effective and optimum technological solutions. MEIPL concepts will be carried through design and engineering, global procurement, construction management and on to commissioning by out professional and experienced engineering and management team. MEIPLs Export markets is working in Algeria, Angola, Burkina Faso, Djibouti, Ethiopia, Ghana, Guinea Bissau, Liberia, Malawi, Mauritania, Morocco, Mozambique, Nigeria, Namibia, Sudan, Tanzania, Tunisia, Uganda, Zaire, Zambia and Zimbabwe.2
Along with it, India offers huge opportunity in the renovation, modernization, updating and life extension of old thermal and hydropower plants. The Electricity Act 2003 requires that the State Electricity Regulatory Commissions provide incentives to generate power from renewable sources of energy as well as indicate a minimum renewable power purchase requirement for all distribution licensees3. A large market for energy form renewable sources is intended being created at a price that assures sufficient returns.
Africa continent strives towards development is generating enormous demand today for infrastructure, appropriate technologies and capacity building for facilitating local value addition to its abundant natural resources, augmenting local production to meet the demands of the growing middle class and generating employment through development of small and medium industry. It covers the areas like oil, mineral and metal, energy (Table-1), transport infrastructure, telecommunications, information technology, water and sanitation, health care, pharmaceutical sector and human resources development.
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* Delegate, Two Conclaves on India-Africa Project Partnership 2005 on March 4-7, 2005 and November 6-8, 2005.
Commercial Energy Production in Africa
Commercial energy production in Africa has nearly doubled since 1970, and is expected to increase another 68% by 2020. Production has remained about flat (at around 7%) as a share of the world total ?African commercial energy production grew from 14.8 quads in 1970 to 26.5 quads in 1997, and is forecast to reach 45.5 quads in 2020. Natural gas production grew the most, by 3.9 quads, followed by growth in oil and coal (3.8 and 3.6 quads, respectively), hydroelectricity (0.4 quads), and nuclear power (0.1 quads). Oil accounted for over 86% of African commercial energy production in 1970, with coal a distant second at 11%, hydroelectricity at 2%, and natural gas at 0.5%. As of 1997, oil had declined to 63%, while coal had increased to 19%, natural gas to 15%, hydroelectric to 2.3%, and nuclear power to 0.5%. As a share of world commercial energy production, Africa has stayed about constant since 1970 at 7%, and is expected to remain at about this share through 2020. African commercial energy production is distributed very unevenly throughout the continent. Around 99% of Africas coal output, for instance, is in southern Africa (mainly South Africa). Natural gas production, on the other hand, is overwhelmingly concentrated in North Africa (mainly Algeria and Egypt). Crude oil production is concentrated in North Africa (Algeria, Egypt, and Libya), West Africa (Nigeria), Central Africa (Gabon), and southern Africa (Angola). East Africa produces almost no oil, gas, or coal 4.
Table-1
Francophone and Team-9 and India Reserves of Oil and Natural Gas.
Most Recent Estimate1
Oil |
Oil | Oil | Natural Gas | Natural Gas | Natural Gas | Natural Gas | ||||||||
| (Billion Barrels) | (Billion Barrels) | (Billion Barrels) | (Trillion Cubic Feet) | (Trillion Cubic Feet) | (Trillion Cubic Feet) | (Trillion Cubic Feet) | ||||||||
Country/Region |
BP Statistical Review2 | Oil & Gas Journal3 | World Oil4 | BP Statistical Review2 | CEDIGAZ5 | Oil & Gas Journal3 | World Oil4 | |||||||
| Benin | * | 0.008 | * | * | 0.000 | 0.040 | * | |||||||
| Burkina Faso | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | |||||||
| Cameroon | * | 0.400 | * | * | 3.496 | 3.900 | * | |||||||
| Chad | 0.900 | 1.500 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | |||||||
| Congo P Rep | 1.784 | 1.506 | 1.784 | * | 4.061 | 3.200 | 4.150 | |||||||
| Cote d’Ivoire | * | 0.100 | * | * | 0.918 | 1.000 | * | |||||||
| Equatorial Guinea | 1.280 | 0.012 | 1.765 | * | 2.472 | 1.300 | 3.400 | |||||||
| Gabon | 2.285 | 2.499 | 2.205 | * | 1.059 | 1.200 | 3.425 | |||||||
| Ghana | * | 0.017 | * | * | 0.848 | 0.840 | * | |||||||
| Guinea | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | |||||||
| Guinea-Bissau | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | |||||||
| Mali | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | |||||||
| Mauritania | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | |||||||
| Niger | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | |||||||
| Nigeria | 35.255 | 35.876 | 36.630 | 176.394 | 178.517 | 184.660 | 180.000 | |||||||
| Senegal | 0.000 | 0.000 | 0.000 | 0.000 | 0.388 | 0.000 | 0.000 | |||||||
| Togo | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | |||||||
| Tunisia | 0.640 | 0.308 | 0.681 | * | 2.649 | 2.750 | 3.885 | |||||||
Table-1
North Africa and India Reserves of Oil and Natural Gas.
Most Recent Estimate1
Oil |
Oil | Oil | Natural Gas | Natural Gas | Natural Gas | Natural Gas | ||||||
| (Billion Barrels) | (Billion Barrels) | (Billion Barrels) | (Trillion Cubic Feet) | (Trillion Cubic Feet) | (Trillion Cubic Feet) | (Trillion Cubic Feet) | ||||||
Country/Region |
BP Statistical Review2 | Oil & Gas Journal3 | World Oil4 | BP Statistical Review2 | CEDIGAZ5 | Oil & Gas Journal3 | World Oil4 | |||||
| Benin | * | 0.008 | * | * | 0.000 | 0.040 | * | |||||
| Ghana | * | 0.017 | * | * | 0.848 | 0.840 | * | |||||
| Gambia, The | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | |||||
| Guinea | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | |||||
| Cote d’Ivoire (IvoryCoast) | * | 0.100 | * | * | 0.918 | 1.000 | * | |||||
| Mali | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | |||||
| Nigeria | 35.255 | 35.876 | 36.630 | 176.394 | 178.517 | 184.660 | 180.000 | |||||
| Sierra Leone | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | |||||
| Senegal | 0.000 | 0.000 | 0.000 | 0.000 | 0.388 | 0.000 | 0.000 | |||||
| Togo | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | |||||
Table-1
North Africa and India Reserves of Oil and Natural Gas.
Most Recent Estimate1
Oil |
Oil | Oil | Natural Gas | Natural Gas | Natural Gas | Natural Gas | ||||||
| (Billion Barrels) | (Billion Barrels) | (Billion Barrels) | (Trillion Cubic Feet) | (Trillion Cubic Feet) | (Trillion Cubic Feet) | (Trillion Cubic Feet) | ||||||
Country/Region |
BP Statistical Review2 | Oil & Gas Journal3 | World Oil4 | BP Statistical Review2 | CEDIGAZ5 | Oil & Gas Journal3 | World Oil4 | |||||
| Year-End 2004 | January 1, 2006 | Year-End 2004 | Year-End 2004 | January 1, 2005 | January 1, 2006 | Year-End 2004 | ||||||
| Algeria | 11.800 | 11.350 | 15.303 | 160.439 | 161.743 | 160.505 | 171.500 | |||||
| Angola | 8.801 | 5.412 | 9.035 | * | 13.067 | 1.620 | 4.000 | |||||
| Egypt | 3.565 | 3.700 | 3.565 | 65.452 | 66.004 | 58.500 | 66.000 | |||||
| Equatorial Guinea | 1.280 | 0.012 | 1.765 | * | 2.472 | 1.300 | 3.400 | |||||
| Libya | 39.126 | 39.126 | 33.550 | 52.632 | 51.313 | 52.650 | 51.500 | |||||
| Sudan | 6.313 | 0.563 | 6.405 | * | 3.037 | 3.000 | 4.000 | |||||
| India | 5.565 | 5.848 | 4.936 | 32.582 | 31.960 | 38.880 | 28.605 | |||||
Table-1
India Investment in Major African Countries (of Oil and Natural Gas.)
Most Recent Estimate1
Oil |
Oil | Oil | Natural Gas | Natural Gas | Natural Gas | Natural Gas | ||||||||
| (Billion Barrels) | (Billion Barrels) | (Billion Barrels) | (Trillion Cubic Feet) | (Trillion Cubic Feet) | (Trillion Cubic Feet) | (Trillion Cubic Feet) | ||||||||
Country/Region |
BP Statistical Review2 | Oil & Gas Journal3 | World Oil4 | BP Statistical Review2 | CEDIGAZ5 | Oil & Gas Journal3 | World Oil4 | |||||||
| Year-End 2004 | January 1, 2006 | Year-End 2004 | Year-End 2004 | January 1, 2005 | January 1, 2006 | Year-End 2004 | ||||||||
| North Africa | ||||||||||||||
| Algeria | 11.800 | 11.350 | 15.303 | 160.439 | 161.743 | 160.505 | 171.500 | |||||||
| Angola | 8.801 | 5.412 | 9.035 | * | 13.067 | 1.620 | 4.000 | |||||||
| Egypt | 3.565 | 3.700 | 3.565 | 65.452 | 66.004 | 58.500 | 66.000 | |||||||
| Equatorial Guinea | 1.280 | 0.012 | 1.765 | * | 2.472 | 1.300 | 3.400 | |||||||
| Libya | 39.126 | 39.126 | 33.550 | 52.632 | 51.313 | 52.650 | 51.500 | |||||||
| Sudan | 6.313 | 0.563 | 6.405 | * | 3.037 | 3.000 | 4.000 | |||||||
| West Africa | ||||||||||||||
| Nigeria | 35.255 | 35.876 | 36.630 | 176.394 | 178.517 | 184.660 | 180.000 | |||||||
Source: http://www.eia.doe.gov/emeu/international/reserves.html, Energy Information Administration,
US Government, January 18, 2006.
* Not Separately Reported
1. Proved reserves are estimated quantities that analysis of geologic and engineering data demonstrates with reasonable certainty are recoverable under existing economic and operating conditions.
2. BP p.l.c., BP Statistical Review of World Energy June 2005, except United States. Oil includes crude oil, gas condensate, and natural gas liquids. United States oil data, including both crude oil and natural gas liquids, and United States natural gas data are from the Energy Information Administration, U.S. Crude Oil, Natural Gas, and Natural Gas Liquids Reserves, 2004 Annual Report, DOE/EIA-0216 (2004) (November 2005). BP notes that “the figure for Canadian oil reserves includes an official estimate of Canadian oil sands “under active development”.” BP says of its data sources for oil reserves that “the estimates in this table have been compiled using a combination of primary official sources, third-party data from the OPEC Secretariat, World Oil, Oil & Gas Journal and an independent estimate of Russian reserves based on information in the public domain. Likewise for natural gas reserves, BP states that “the estimates in this table have been compiled using a combination of primary official sources, third-party data from Cedigaz, the OPEC Secretariat and Oil & Gas Journal. BP also notes that “the reserves figures shown do not necessarily meet the United States Securities and Exchange Commission definitions and guidelines for determining proved reserves nor necessarily represent BPs view of proved reserves by country.”
3. PennWell Corporation, Oil & Gas Journal, Vol. 103, No. 47 (December 19, 2005). Oil includes crude oil and condensate. Data for the United States are from the Energy Information Administration, U.S. Crude Oil, Natural Gas, and Natural Gas Liquids Reserves, 2004 Annual Report, DOE/EIA-0216(2004) (November 2005). Oil & Gas Journal‘s oil reserve estimate for Canada includes 4.7 billion barrels of conventional crude oil and condensate reserves and 174.1 billion barrels of oil sands reserves.
4. Gulf Publishing Co., World Oil, Vol. 226, No.9 (September 2005), except United States. Oil includes crude oil and condensate but excludes natural gas liquids. Data for the United States are from the Energy Information Administration, U.S. Crude Oil, Natural Gas, and Natural Gas Liquids Reserves, 2004 Annual Report, DOE/EIA-0216 (2004) (November 2005). World Oil’s Canadian oil reserve estimate “does not include 174 billion bbl [barrels] of oil sands reserves.”
5. Centre International d’Information sur le Gaz Naturel et tous Hydrocarbures Gazeux (CEDIGAZ), Natural Gas in the World, Major Trends for the Gas Industry July 2005 (Electronic Database), except United States. Data converted from cubic meters to cubic feet at 35.315 cubic feet per cubic meter. United States data are from the Energy Information Administration, U.S. Crude Oil, Natural Gas, and Natural Gas Liquids Reserves, 2004 Annual Report, DOE/EIA-0216 (2004) (November 2005).
6. Includes one-half of the reserves in the Neutral Zone, if separately reported.
Indias Potential in Energy Sector
Coal India Limited (CIL) is having the capacity of buying and selling the coal. TATA is working in the Queen marry coal mining, Australia and using the coking coal for its internal consumption. CIL is selling coking coal to retail customer like TATA. CIL is functioning with in the radius of 200Kilometer and its South India is not taking coal from CIL and is importing through sea route. The Road and Railway transport affected in rates of coking coal and make it high. As a result, the business policy of South India companies is to getting cheap and good quality coking coal through import. Coal India Videsh and CIL are authorized to foreign investment. Primarily, they are giving priority to coking coal. Power Coal is their second priority in the mining sector. Power coal means the coal uses for power generation. India is strongly interested in the coastal area and it will be the route to get coking coal in India. Australia and South Africa are having the equi-distance and same amount through sea trade but India will get better security in South Africa. South Africa is crucial of course as compare to Australia. Australia is supplying coking coal to their steel companies and supplying to Indian steel industry as well. Indonesia is important for the non-coking coal. Indonesia doesnt have many industries to supply it locally, thats why they are interested in exporting the coal. There is an option to choose Africa and Australia for the coking coal. The demand of coking coal in China, Canada and USA industrial sectors is very high, which force them not to involve in the coking coal export.
South Africa is the only country working on coal to petroleum. They dont have oil and today South Africa sustains on it. The cost of this oil is $70 a barrel and thats why it sounds very attractive. Assam coal in India is soothing for petrol. It is the high time to start coal to petrol technology.
50% of Indian coal is used for power generation and produces high ash, which becomes a problem. India encourage to use them washing coal to remove ash. The technology was improved four-year back and as a result ash coal is used for power generation. But the coal is better after washing. There is high demand of coking coal for steel industry. Thats why Coal India targets these three countries. TATA, Coal India and other companies are working on these lines.
Coal India started coalmines project in Zambia 7-8 years back but did not carry forward. Mittal Steel and Mittal Ispat Steel are planning to work in this sector. Mittal Ispat Steel is working in the Nigerian mines.
Bharat Heavy Electrical Ltd. (BHEL) has forayed into Ethiopia with a $5 million order for setting up 230 K V substations on turnkey basis. BHEL outbid Chinese and other multinational companies to bag the project from the Ethiopian Electric Power Corporation (EEPCO). ONGC, Indias most valuable company and worlds largest steel maker- Mittal steel have signed an MoU on 23 July 2005 to work together to ensure Indias energy security through overseas acquisition particularly in Africa. CIL is examining some coking coal mining blocks in Africa. Countries on CIL scanner are Mozambique, South Africa and Zimbabwe and a team will visit here. CIL favored the formation of a subsidiary on the lines of ONGC Videsh, for carrying out its overseas mining activities and a note on this had already been sent to Coal Ministry5.
A business delegation under the leadership of SICCI president from Chennai that visited South Africa early August 2005 has found that a nearly identical business environment and huge demand for Indian products such as mines and minerals, cement, building materials, textiles, auto components, chemicals and pharmaceuticals, agro food processing and information technology and telecommunications as specific areas offering scope for Indian entrepreneur. The delegation signed memoranda of understanding and suggested the introduction of direct air services by South African Air lines from Chennai to Johannesburg via Mauritius.
The Indian involvement in Africa
Indian companies have implemented numerous contracts in Africa, spanning various sectors, with such support from Exim Bank. In the African region, contracts implemented by Indian companies include one in South Africa in the automobile and transport sector and in Namibia in the export of newsprint machines. Exim India has positioned itself to provide support to Indian companies who endeavor to globalize their operations. The bank operates a programme to support overseas investment by Indian promoter through joint ventures/ wholly owned subsidiaries. Such support includes equity finance and in select cases, directs participation in equity along with Indian promoter, to set up such ventures overseas. The bank has supported several such ventures in the African region, as for instance, in Kenya, Mauritius, South Africa, Nigeria, Zambia, Morocco, Uganda, and Tanzania. Along with it, Exim India has in place a programme for forfeiting-an alternative trade financing mechanism without recourse to Indian exporters. A number of transactions involving export of goods to Africa have been facilitated by Exim India through this mechanism.
Exim India has a long standing working relationship with the International Finance Corporation (IFC) and Eastern & Southern African Trade & Development Bank (PTA Bank) to facilitate the utilization of Indian consultants to initiate/project facilities promoted and sponsored by them. Today, over 50 assignments have been supported in Africa under the arrangements with IFC and PTA Bank. Some of the consultancy assignments supported by the Bank in the African Region include:
Botswana : Auto Parts, Stone Crushing Project
Lesotho : Plastic Bags Project
Namibia : Investment Promotion; Training in Trade Development
Mozambique : Motors
Zimbabwe : Printing
Kenya : Textiles
Tanzania : Oil extraction project
Angola : Detergents
Madagascar : Polypropylene Bags
Zambia : Gems and Jewelry
Nigeria : Cotton Ginning Project, Sugar project
Ghana : Sea Food Processing, Pharmaceuticals
The agreement between Govt. of India and African Development Bank (ADB) under the technical cooperation provides a shortlist of Indian consultants for consideration of ADB in respect of technical assistance being supported by GOI under Indian Consultancy Fund. The ADB financed projects to Consulting Engineering Services (India) Pvt. Ltd. [CES] and RITES Ltd. (earlier known as Rail India Technical and Economic Services Ltd.) to undertake project preparatory study in Namibia and Tanzania6.
India is keen to involve in multifarious activities of Africa. There are number of projects in pipeline in Africa, funded by ADB and World Bank. The role of India and Indian investors is seen in number of economic and social activities, which persuade them to indulge in these projects. Table-2 and Table-3 mention the detail of these activities and India is primarily looking after these projects and taken affirmative steps of intervention.
The major India targets today in different sectors in Africa such as:
Petroleum products
These products have emerged as an important target of exports in recent years. Indias exports of petroleum products to Africa rose to US$ 240 mn in 2003-04, thereby emerging as one of the top export items to Africa.
Table-2
Indias Projects in Pipeline in Africa
| No | Country | Project | Executing Agency | Project
Cost US $ million |
Funding
Agency |
| 1 | Algeria | ICT Development | Ministry of Post | 23.0 | W B |
| 2 | Algeria | Construction of Dam at Douera & Mazafran | Agence nationale des barrages | 15.0 | ADB |
| 3 | Angola | Emergency Multi-sector Recovery | Ministry of Planning | 235.0 | W B |
| 4 | Benin | Management of Forests & Adjacent Lands | Ministry of Agriculture, Livestock and Fisheries | 6.0 | W B |
| 5 | Burkina Faso | Power Sector Development and Reform | Ministry of Energy & Mines | 66.4 | W B |
| 6 | Cameroon | Education Development and Capacity Building | Project dappui au Secteur de lEducation | 15.0 | W B |
| 7 | Cameroon | Maintenance & Construction of Infrastructure for Petroleum Industry | Entreprise des chantiers navals et industriels du Cameroon | 64.0 | ADB |
| 8 | Chad | Petroleum management capacity Building | Comite Technique national de Suivi et de Control NDjamena | 11.5 | W B |
| 9 | Ethiopia | ICT assisted programme | Ethiopian ICT Development Authority | 25.0 | W B |
| 10 | Egypt | Solar Thermal Hybrid Project | Ministry of Electricity and Energy | 52.0 | W B |
| 11 | Eritrea | Road Sector Project | Ministry of Public Works, Infrastructure Department | 24.0 | W B |
| 12 | Gambia | Community Development Project | Dept of State for Finance and Economic Affairs | 19.7 | W B |
| 13 | Ghana | Health Services Rehabilitation-III | Ministry of health | 26.4 | ADB |
| 14 | Guinea-Bissau | National Community Driven Development | Ministry of Economy & Finance | 10.0 | W B |
| 15 | Kenya | Rural health Project-III | Ministry of Health | 27.0 | ADB |
| 16 | Lesotho | Health & Social Welfare Project | Ministry of health & Welfare | 12.5 | ADB |
| 17 | Madagascar | Road Development Project in Toliera | Ministry of Transport | 51.3 | ADB |
| 18 | Malawi | Energy & Mining Project | Ministry of Economic Planning and Development | 43.0 | W B |
| 19 | Mauritania | Water Supply & Sanitation | Ministry of Energy & Hydraulics | 30.0 | W B |
| 20 | Mozambique | Institutional support for Poverty Reduction | Ministry of Planning & Finance | 46.6 | ADB |
| 21 | Morocco | Solar Energy Center | Ministry of Energy | 342.0 | ADB |
| 22 | Mauritius | Northern Plains Irrigation project | Ministry of Agriculture | 12.5 | ADB |
| 23 | Namibia | Tandjiesjkoppe Irrigation Project | Ministry of Agriculture, Water & Rural Development | 33.1 | ADB |
| 24 | Swaziland | Education project-II | Ministry of Education | 5.5 | ADB |
| 25 | Senegal | Minor Irrigation Project | Ministry of Agriculture | 26.4 | ADB |
| 26 | Zambia | Increased Access to Electricity & ICT Services | Ministry of Energy & Water Development | 34.5 | W B |
| 27 | Zimbabwe | Rural Health Services Project-II | Ministry of Health & Child Welfare | 8.0 | ADB |
ADB- Africa Development Bank
Source: India-Africa project Partnership March 2005, ADB, Exim India, Ministry of Commerce and Industry, MEA, India.
Table-3
Indias Projects in Pipeline in Africa
| No | Institution | Project | Executing Agency | Project
Cost US $ million |
Funding
Agency |
| I | Multinational | African Virtual University | Agency of African Virtual University | 7.8 | ADB |
| 2 | Multinational | Mombassa-Nairobi-Addis Ababa Road Corridor Development Project | Ministry of Road & Public Works Nairobi Kenya/Ethiopian Road Authority | 56.0 | ADB |
| 3 | Multinational | South African Development Community | Water Resources Coordination Unit | 3.9 | ADB |
Iron and steel
Primary and Semi-finished iron and steel is another target of India.
Yarn and fabrics
Man made yarn and fabrics keeping India cotton agriculture growth in mind is another target of India.
Plastic and linoleum products
This sector is having a tough competition with China and East Asian countries, which persuade India to target Africa in domestic and industrial scale.
Rubber manufactured products
The products like bathroom footwear, shoes, gloves, buckets, domestic items, industrial belts and sockets, army purposes, etc are important place in India target.
Nigeria is an important market for Indias exports of drugs and pharmaceuticals, machinery and instruments, and manufactures of metals, and figures among the top 10 global markets for these commodities. Further, Tunisia ranks among the top 10 global markets for Indias exports of transport equipments during 2003-04.7
Mutual benefits for India and African countries
Exim India extends Lines of Credit (LOCs) to Governments, parastatal organizations, commercial banks, financial institutions and to regional development banks to support export of eligible goods on deferred payment terms. In total, the Bank has 16 operative LOCs covering 32 countries amounting to US $ 238 million in the Africa region, including those, extended with the support of Indian government. The operative LOCs as on February 2005, extended to the African region includes:
Rs. 200 mn (US$4.54 mn) to Offshore Development Company Ltd, Namibia.
Two lines of US$ 10 million each to PTA nk covering 16 countries in the eastern and southern African region.
US $ 5 mn to Seychelles Marketing Board, Seychelles
US$ 10 mn to ABSA bank, South Africa.
US$ 10 mn to Central bank of Djibouti
US$ 15 mn to Govt. of Ghana
US$ 10 mn to West African Development Bank (BOAD) covering 8 countries in the West African Region
US$ 10 mn to Govt. of Sudan
US$ 5 mn and US$ 40 mn to Govt. of Angola
US$ 20 mn to Govt. of Mozambique
US$ 5 mn to Govt. of Lesotho
US$ 15 mn and US$ 18 mn to Govt. of Senegal8
The African region is an important source for Indias imports of several items.
A) Gold dominates Indias imports from Africa with a significant share of 48% during 2003-04. South Africa is the second largest source, after Switzerland, for Indias gold imports accounting for 23.3% (US$1.5 bn) of Indias total gold imports (US$6.5 bn) during 2003-04. The major items of imports are:
1. Inorganic chemicals 17.4%
2. Cashew nuts 8.1%
3. Raw Cotton 4.8%
4. Wood and wood products 3.5%
5. Metal ferrous ores and metal scrap 3.2%
B) Morocco (18.7%), Senegal (9.9%) and South Africa (8.9%) are the largest source of Indias global imports of inorganic chemicals respectively, of Indias total imports of organic chemicals (US$1.3 bn) during 2003-04.
C) Tanzania (18.9%), Guinea-Bissau (17.5%) and Cote dIvoire (16.1%) are the three largest sources for Indias global imports in cashew nuts respectively, of Indias total cashew nuts imports (US$299 mn).
D) In raw cotton, Egypt, Mali, Sudan, Benin, Tanzania, Cameroon and Burkina Faso ranked among top ten sources for Indias global imports of raw cotton during 2003-04.
E) Cote dIvoire, Nigeria, Gabon, and Benin are among the top ten largest sources for Indias imports in wood and wood products in 2003-049.
India and Africa Emerging Scenarios
With a view to significantly enhance Indias trade with Africa, the Govt. of India launched an integrated programme Focus Africa from the year 2002-03. The main objective of the programme is to increase interactions between the two regions by identifying the areas of bilateral trade and investment. India under Focus Africa programme has been designed with the objective of enabling India to emerge as a key partner in Africas developmental processes by providing competitive and appropriate technologies, products and services.
The Confederation of Indian Industry (CII) Africa Committee has the mandate to further business co-operation that helps establish a symbiotic relationship between India and emerging African economies. CII has Institutional Agreements with 32 counterpart organizations in 18 African countries with the objective of facilitating exchange of information and promoting business interests of Indian and African Industry10. Export-Import Bank of India (EXIM India) operates a number of financing and support programmes to facilitate and promote Indias trade and Investment in the African region. The EXIM Bank operates a programme to support overseas investment by Indian promoter through joint ventures/ wholly owned subsidies. Such support includes finance and in select cases, directs participation in equity along with Indian promoter, to set up such ventures overseas. This has assumed significant relevance lately in the content of Africas Look East Policy.
A. Indias Efforts (TEAM-9) in Africa
India today pledged $500 million in the form of concessional credit facilities to eight West African countries (Burkina Faso, Chad, Cote d’Ivoire, Equatorial Guinea, Ghana, Guinea Bissau, Mali and Senegal) who, together with India, form TEAM-9 or Techno-Economic Approach for Africa-India Movement. TEAM-9 Ministers, who signed a memorandum of understanding (MoU), agreed that a Heads of State/Government meeting would be held regularly.
B. Two Conclaves on India-Africa Partnership 2005
The first IndiaAfrica Project Partnership Conclave, March 4-7, 2005 was indeed a pan-African glimpse on the emerging opportunities in the African continent. The conclave was represented at the ministerial level by most of the African countries. Besides the ministers, the respective national chambers of commerce, financial institutions and top businessmen were also part of the event. The leaders from African countries saw India strongly focusing on joint venture projects with them, which would facilitate Africas ability to access the 500 million US dollar line of credit under TEAM 9 and the 200 million US dollar line of credit under NEPAD.
The African countries look at India as a source for technology, expertise and manpower training. There is a great deal of convergence of interests. The organizers said, The primary objective of the event was to enable Indian technical consultants, industry and project exporters to participate in a wide range of developmental activities and projects, which are in the offing in several African countries, and which are also recipients of significant funding from multilateral or regional agencies and India11. Indias efforts to aid and support Africa in its development and in the establishment of its industries, received a major boost through the three-day India-Africa Project Partnership.
It is felt that there is also a need to facilitate the sharing of technologies available with Indian Small & Medium Enterprises (SME), for partnering projects in the private sector in Africa. The target areas for Indian companies are infrastructure, especially power and energy, transport, telecom, irrigation, water supply, sanitation and housing. Other sectors would include agriculture, agro-food processing, healthcare and pharmaceuticals, turnkey projects and engineering consultancy. Power and energy sector is crucial to the development of African economies. Leading companies of India like Tata, Kirloskar Brothers Ltd, Angelique International, Mohan Energy, International Tractors, Sterlite, Kalpataru, Jaguar Overseas, SSP Ltd, Praj Consultants, who have made a mark in the African continent, need to focus Africa through region wise.
India has been geared towards strengthening of horizontal SouthSouth linkages, and towards promoting self-reliance through transfer of technologies, appropriate to the needs of her partners. India sees SouthSouth Cooperation as the embodiment of a new spirit, of an alternative, cooperative approach to the challenges of economic development. Minister of State for Commerce and Industry Mr E.V.K.S. Elangovan spoke about Indias burgeoning trade ties with Africa and the need for more people-to-people contacts12.
Second Conclave
The Second Africa and India Project Partnership Conclave from 6-8 November 2005, focused on the TEAM-9 efforts and its activities in the West Africa. This conclave emphasized on the New Partnership for Africa Development and TEAM-9 projects valued at $ 360 million has been approved and letters of credits opened. India focused on the Energy sector, Small and Medium Scale Enterprise (SMEs) under TEAM-9 programme. The e-commerce, e-medicine, telecommunication and IT sector were discussed and number of countries presented their projects. The programme of Focus Africa, line of Credit to SME & other sector is announced that valued $360 million. Along with it, e-education, tourism and hotel industry, housing construction projects are also targeted. MEA shared favorable opinion on the Space Technology and Indias experience regarding it. The need of Africa in this area is appreciated and MEA promised to work on this issue with them.
This conclave came forward with the motto that continues to be at the forefront and has been addressed that involve the need for raising the trade and investment levels as well as avenues of technology transfer and the need to address education and training requirements in Africa. The key sectors covered in power and energy, transport and other infrastructure projects, Agriculture, food processing and water management. One of the highlights has been a special session devoted to deliberations on financing partnerships. SMEs sectors discussed how to overcome them to become effective participants in the globalized regime.
Suggestion and Conclusion
Africa as a whole, for Indian business, is still a largely uncharted territory. The existing level of business ties between India and Africa does not reflect the full potential. The consolidation of Indo-Africa economic co-operation, bilateral or multilateral, can usher in a new era of South-south co-operation. Regional economic cooperation is considered to be an answer to Africas developmental needs. Various steps were taken for integrating regional economies are creating opportunities for projects in all sectors including agriculture, manufacturing and services. Indian government introduced many initiatives for partnerships and mutual benefits, between India and the African countries. Institutional capacity building is crucial for development. A trained and educated workforce has given India a considerable edge over the rest of the developing world. India can help African countries in developing their infra-structural systems. President Dr. Abdul Kalam announced the willingness of Government of India to provide seamless and integrated satellite, fiber optics and wireless network connecting 53 African countries including Francophone during the Pan African Parliament, Johannesburg, on 16 Sept 2004. This will provide three Connectivities: (i) Heads of the State Network for e-governance (ii) Tele-education network for higher education, skill enhancement and capacity building and (iii) Tele-medicine for providing health care and super specialty medi-care. This programme will be funded by India. This network will be in position by early 2007.
To sum up, there is a possibility of PTA and then move to FTA keeping the beneficial measures in mind. The need to avoid the Double Taxation Avoidance is felt and there is possibility to remove this barrier. FTA between Indo-Africa will enhance the level of bilateral trade. Thus it was agreed to adopt a longer-term approach to the idea of an FTA and recommend implementation of measures to expand Indian trade in Africa on a priority basis. The emphasis should be on trade creation and minimizing trade diversion to maximize welfare. Exim Bank agreed to help Africa region during the Conclave on India-Africa Project Partnership to strengthen the trade on the preferential line of credit.
Suggestions
1. India has geographic advantages in linking the African and Asian continents. There is a need to develop trade between Indian Ocean and Atlantic Ocean route in building Indo-Africa trade and economic relations in a comprehensive way.
2. To start with, India needs to build bilateral relations with Francophone countries particularly Benin, Cameroon, Congo, Dem. Rep. of Congo, Djibouti, Guinea, Gabon, Mauritania, Niger and Rwanda. The rest of Francophone countries are already covered under the scheme of India and TEAM-9.
3. Once the bilateral relations will develop between Indo-East African countries, the efforts for multilateral relations should be persuaded. It will lead to develop a common market between Indo-Eastern African countries.
4. India should carry forward this idea of common market in SADC region by involving NEPAD, EBID- the Bank for Investment and Development of ECOWAS, ECOWAS Regional Development Fund (ERDF) and ECOWAS Regional Investment Bank (ERIB).
5. Along with it, there is a need to build people to people contact programme in understanding each other culture, language, traditions and ethics. It will demystify the existing doubts and impact established by French and British colonialism about each other on the one hand and will provide a way to move forward in understanding common issues of development.
6. The secular traditions of India and its worldwide image to keep Hindus, Muslim and other communities together are intact and are known worldwide. Further, that out of 1.3 billion Muslims, 900 millions lived in Africa and the Indian continent. This is the beginning and inspiration for African countries and India to move forward in the changing international relations and develop their markets accordingly.
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References
1. Oil and Gas, IBEF, (CII), 2005, p.3.
2. mohan, Breaking Boundaries. . . Joining Hands, MEIPL, 2005, p.4.
3. Power, IBEF, (CII), 2005, p.27.
4. For More,http://www.eia.doe.gov/emeu/international/reserves.html,
Energy Information Administration, US Government, January 18, 2006.
5. The Hindu, October 15, 2005.
6. India-Africa project Partnership March 2005, ADB, Exim India, Ministry of Commerce and Industry, MEA, India.
7. CII India-Africa Project Partnership 2005, Background paper, Delhi.
8. Ibid.
9. Ibid.
10. Ibid.
11. Delegate, IndiaAfrica Project Partnership Conclave, March 4-7, 2005.
12. Ibid.