Sectoral Paper - Export Credit

Introduction
Exports play an important role in accelerating the economic growth of the country. Of the
several factors influencing export growth, credit is a very important factor which enables
exporters in efficiently executing their export orders. Export credit is granted in Rupees as well
as in foreign currency.
RBI has initiated several measures in the recent years to ensure timely and hassle free flow of
credit to the export sector. These measures, inter alia, include rationalization and
liberalization of export credit interest rates, flexibility in repayment/prepayment of pre-
shipment credit, special financial package for large value exporters, export finance for
agricultural exports, Gold Card Scheme for exporters etc. Further, banks have been granted
freedom by RBI to source funds from abroad without any limit exclusively for the purpose of
granting export credit in foreign currency, which has enabled banks to increase their lendings
under export credit in foreign currency substantially during the last three years. Advances
made by banks under ‘Export Credit’ upto sanctioned limit of ` 25 crore per borrower (for units
having turnover upto ` 100 crore) have been brought under the ambit of the Priority Sector as
per the revised guidelines issued by the RBI. These include pre-shipment export credit and
post shipment export credit.
Pre-Shipment export credit
Pre Shipment credit is issued when the exporter wants the payment of the goods before
shipment, to enable him to procure raw materials, process it & ship them to buyers through
packing credit/advance against cheques/drafts. If the goods to be exported are not under OGL
(Open General License), the exporter should have the required license /quota permit to export
the goods.
Post-Shipment export credit
Post Shipment Finance is provided to an exporter against a shipment that has already been
made. This type of export finance is granted from the date of extending the credit after
shipment of the goods to the realization date of the exporter proceeds. The post shipment
finance is provided through Export Bill purchase/discounting/advance against export
consignments or undrawn balance exports or advance against claims of Duty Drawbacks. After
the shipment, the exporters lodge their claims, supported by the relevant documents to the
relevant government authorities. These claims are processed and eligible amount is disbursed
after making sure that the bank is authorized to receive the claim amount directly from the
concerned government authorities.
GoI, has rationalised documentation process to improve ease of doing export business. Now
only three documents viz. Bill of Lading/ Airway Bill, Commercial Invoice cum Packing List,
Shipping Bill/ Bill of Export are required to avail export credit. GoI has also announced the
Foreign Trade policy 2015-20 which aims to double India’s export to $900 billion by 2020. It
focuses on defense, pharma, hi-tech products, green goods, e-commerce & project export. It is
expected that the policy will diversify Indian exports markets and products and give a boost to
India’s exports.
Ground Level Credit Flow in the last three years
Under priority sector lending, banks operating in Karnataka State had disbursed `1533 cr., `
6731 cr. and ` ____ cr. during 2018-19, 2019-20 and 2020-21 respectively.
Exports of Karnataka
Karnataka has a long tradition of overseas trade. Historically, Karnataka has been a major
exporter of commodities like coffee, spices, silk, cashew nuts, handicrafts and agarabattis.
Karnataka has been ranked number 1 in NITI Aayog India Innovation Index for 2020.
Karnataka ranks number 5 in Export Preparedness Index. Nearly 65% of India's aerospace
exports originate in Karnataka. It is India's largest Electronics chip design hub. 50% of India's
machine tools production happens in Karnataka. 63% of our installed power capacity is in
renewable energy sources.
An Export Strategy for Karnataka has been formulated in November 2020, for a period of five
years, in collaboration with Federation of Indian Export Organization. Karnataka has been
chosen as one of the Pilot States for setting up 5 Export Development Centre in Shivamogga,
Hubballi - Dharwad, Ramanagara, Bidar and Mysuru. Govt. of Karnataka has already taken
steps and signed MoUs with leading e-commerce players like Amazon Global Selling and
Flipkart to provide e-marking access to MSMEs, artisans, Geographical Indications (GI)
producers for promotion of domestic as well as export market. The State initiated 9-product
specific industrial clusters, with a focus on less developed Northern Karnataka region.
In the last two decades, the State has emerged as a major player in the export of electronic and
computer software, engineering goods, ready-made garments, petrochemical, agro and food
processing products, chemicals, minerals and ores, marine products, etc. Karnataka has
carved out a niche for itself in the global marketplace as the knowledge and technology capital
of the Country. The State has made rapid and spectacular strides in the new economy.
Information technology, biotechnology and research and development institutions have
enhanced Karnataka's achievements at national and global levels. Karnataka accounts for
more than one third of electronics and computer software exports from the country. It is also
a leader in exports of readymade garments, petro-chemicals and engineering commodities
from Southern Region. The state has sector-specific SEZs for key industries such as IT,
biotechnology, and engineering, food processing and aerospace
Export performance of Karnataka
Karnataka is the IT hub of India, ranks No.1 in software/service exports and stands fourth
largest technology cluster in the world. Quite aptly, it is known as the ‘silicon valley’ of India.
Karnataka also ranks 5th in merchandise exports in the national export basket. Karnataka
overall exports have shown increase during 2019-20 as compared to the year 2018-19 mainly
due to good performance in service sector even though there is 3% fall in merchandize exports.
Karnataka's exports in terms of value in 2017-18, 2018-19 and 2019-20 are shown in the table
given below: (` crore)
S. No Commodity 2017-18 2018-19 2019-20
1 Electronics & Computer Software 429342.77 544656.00 593422.70
2 Readymade garments 15169.76 15935.10 15707.11
3 Petroleum 14419.17 25035.80 18025.00
4 Engineering 37718.25 33420.30 35535.20
5 Iron Ore and Minerals 1734.28 2116.40 2209.26
6 Silk Products 303.92 320.60 283.80
7 Coffee 3708.81 3131.80 2767.15
8 Basic Chemicals, Pharmaceuticals
and Cosmetics 14384.15 12296.90 13431.10
9 Agriculture & Processed food
including seeds and beverages 4217.59 5032.90 5128.11
10 Germs and Jewellary 10235.83 570.30 351.73
11 Cashew & Cashew Kernals 1215.31 850.30 797.92
12 Handicrafts 1089.28 1448.40 1353.62
13 Leather products 521.81 562.00 502.28
14 Chemicals & Allied Products 548.19 694.75 702.26
15 Marine Products 1211.18 1275.90 1048.72
16 Plastic Goods 987.43 1368.00 1222.13
17 Spices 329.79 724.80 509.76
18 Wool & wollen Products 6.90 2.03 4.84
19 Others 8635.91 9983.05 10103.16
 Total 545780.33 659425.33 703105.85
(source: Economic Survey Karnataka 2020-21)
Karnataka's export performance amounted to about Rs. 5,45,780.33 crore in 2017-18, which
has increased to Rs. 7,03,105.85 crore in 2019-20 which constituted about 18.80% of the
Country's exports in that year. The share of merchandise exports in the National exports
constitutes around 5.31% and software/service exports around 38.6% for the year 2019-20.
Exports of electronics and computer software and other service sector constitute the largest
share in the State's exports. The other commodities which had good increase in share of
Karnataka's exports in 2019-20 as compared to 2018-19 are engineering products, chemicals
and pharmaceuticals and agriculture process food sector. The exports which showed decline
as compared to 2018-19 are petroleum products, silk, coffee, cashew, leather, handicraft,
plastic products. This is mainly due to lower exports especially during February and March
2020 due to global Covid-19 situation.
Exports as percent to Gross State Domestic Product (GSDP) of Karnataka was 28.90% in 2018-
19, which had grown from 7.36% in 1993-94. Higher export performance is an important
determinant of increasing degree of openness to export trade. Degree of openness is measured
by the ratio of value of exports to GDP at National level and by the ratio of value of exports to
GSDP at the State level. This is remarkably higher than that of all India (at about 10%).
Increasing degree of openness to trade is an indicator of economic globalization. From this
viewpoint, the levels of Karnataka's economic globalization have been higher than at all India
level.
Policy support for exports
Foreign trade is in the Central List of the Indian Constitution. The Government of India is
empowered to formulate all rules and regulations for foreign trade applicable for the country
as a whole. The role of the State Government is complementary by way of providing supportive
and special promotional measures for promoting foreign trade, especially in regard to exports
of goods and services.
The State is providing various incentives & concessions to the Micro, Small and Medium
Enterprises(MSME) sector to compete in the international market. The State Government has
contemplated various initiatives along with incentives and concessions for the promotion of
exports in the New Industrial Policy 2020-25.
Visvesvaraya Trade Promotion Centre (VTPC)
Visvesvaraya Trade Promotion Centre (VTPC) under the aegis of Department of Industries
and commerce of GoK is the official institution for compilation of the export data for 19
commodities from Director General of Commercial Intelligence and Statistics, Kolkata, Export
Promotion Councils (EPCs), Commodity Boards and other State Agencies. Trade and Industry
Bodies have also supported for the creation of database.
In order to encourage growth and development of exports from the State, Visvesvaraya Trade
Promotion Centre (VTPC) conducts various capacity building programs, awareness programs,
export management training programs and provides services across market intelligence,
export documentation, finance and other critical areas to the exporting community. VTPC has
established Export Information Centres at Dharwad & Mysuru to facilitate exporters of the
State.
Geographical Indication Policy
Geographical Indications(GI) Policy which aims to protect the traditional legacies of the State,
assist and support infrastructure development required to strengthen the GI clusters in the
State was formulated during 2019-20. Taking forward the initiatives announced in the Policy,
VTPC has undertaken Diagnostic Studies of 7 GI clusters in the State spanning Ganjifa cards
of Mysore, Mysore Traditional Paintings, Udupi Sarees, Bidriware, Mysore Rosewood Inlay,
Udupi Mattu Gullaa Brinjal and Udupi Jasmine. Besides, Karnataka is home to a total of 46
Registered GIs as on date. Further, the Authorised User base of various GI products in
Karanataka currently stands at 399. Through Market Development Assistance Scheme, GI
artisans are being facilitated at India International Trade Fair every year by way of providing
stalls to them, which may provide a spotlight on GIs.
S.No. Geographical Indications District
1 Appemidi Mango Shimoga
2 Bababudangiris Arbabica Coffee Chikmagalore
3 Bangalore Blue Grapes Bangalore Rural
4 Bangalore Rose onion Bangalore Rural
5 Bidriware
6 Bronzeware of Karnataka
7 Byadagi Chilli Haveri
8 Chennapatna Toys Ramanagara
9 Chikmagalore Arabica Coffee Chikmagalore
10 Coorg Green Cardamom Kodagu
11 Coorg Mandarin Orange Kodagu
12 Devanahalli Pomello Chikkaballapur
13 Dharwad Pedha Dharwad
14 Gulbarga Tur Dal Kalaburgi
15 Guledgudd Khana Bagalkot
16 Hadagali Malligae Ballari
17 Ilakal Sari Bagalkot
18 Jasmine of Karnataka
19 Kamalapur Red Banana Ballari
20 Kasuti Dharwad
21 Kinhal Craft Koppal
22 Kolhapuri Chappal Belgaum
23 Mangalore Buns Dakshina Kannada
24 Mangalore Tiles Dakshina Kannada
25 Malabar Pepper Dakshina Kannada
26 Molakamuru Sari Chitradurga
27 Monsooned Malabar Arabica Coffee Dakshina Kannada
28 Monsooned Malabar Robusta Coffee Dakshina Kannada
29 Mysore Agarbhathi Mysore
30 Mysore Betel Leaf Mysore
31 Mysore Painting Mysore
32 Mysore Pak Mysore
33 Mysore Rosewood Inlay Mysore
34 Mysore Sandal Soap Mysore
35 Mysore Sandalwood Oil Mysore
36 Mysore Silk Mysore
37 Mysore Ganjifa Cards Mysore
38 Mysore Malligae Mysore
39 Nanjanguad Banana Mysore
40 Navalgund Durrie Dharwad
41 Banjara Sandur Lambani Embroidery Ballari
42 Sirsi Supari Uttara Kannada
43 Udupi Mattu Gulla Udupi
44 Udupi Malligae Udupi
Special Economic zones (SEZs) of Karnataka
There are 75 SEZs constituted under SEZ Act 2005 of Karnataka, of which 36 are operational
with investment of Rs.99,055.56 crore and generating employment for 3,72,927 persons.
Currently there are 495 SEZ units. The value of exports from these SEZs during 2016-17
accounted to `66985 crore. As fiscal package of incentives and concessions extended to SEZ
developers and SEZ units include exemption from stamp duty and electricity duty. Capital
subsidy for common effluent treat plant. The State's information technology and
biotechnology sectors have attracted significant investments and contribute to significant
exports from the country in those sectors.
Export Strategy of Karnataka
The Exim policy of the Govt. of India provides a national policy framework. At the same time,
the State Govt. needs to provide focused facilitation to enable rapid growth of exports from
Karnataka in sectors in which the State enjoys competitive advantages. It is in this context that
a policy framework to give impetus to establishing best practice, providing for capacity
building and facilitating quality and competitiveness of domestic exporters becomes critical.
In order to achieve these objectives, the following strategy will be adopted.
1. To create a strong networking with Export Promotion Councils, FIEO, ITPO, NCTL, and
Products Sectoral Associations to give impetus to Public – Private partnership.
2. To Provide E – Governance Support to exporters in Karnataka
3. To establish a B2B exchange, which would facilitate even the small and tiny unit in the
State to take up online trading activity
4. To create a strong analytical database on exports and exporters in Karnataka
5. To promote Public –Private initiative in developing competitive export infrastructure
6. To setup an institutional mechanism in the State for promoting exports like State Level
Exports promotion Council, State Level Export promotion Committee and district Level
Exports Promotion Committee
7. To Strengthen and restructure VITC as the Export Promotion Board of Karnataka, which
shall be the Nodal Agency to plan and execute Strategies to sustain Karnataka as a global
hub for international trade.
8. To focus on catalysing competitive advantages that Karnataka has in the Global market by
increasing its exports in Information Technology, Bio Technology, Food Processing,
Electronics & Communication, Garments, Machine tools and precision Engineering
Goods, besides the traditional exports
9. To Identify Sector specific support measures required for acceleration of exports in sectors
in which the state has competitive advantages and to encourage them in consultation with
the concerned sectoral association
10. Exporters in Karnataka are mostly concentrated in few district, the majority of them being
located in Bangalore. All sections of exporters have their export associations. VITC Should
closely and actively co-ordinate with all the export associations and take up the following
measures.
11. Evolve Suitable export oriented strategies focusing on specific products sectors with inputs
from the Export Associations/ Exporters. This will include taking part in international
trade fairs/ exhibitions, providing inputs on technology upgradation, packaging, quality,
etc.
12. Undertake market research on focus countries, markets and sectors and provide market
information to the exporting community.
13. Have a time bound action to implement the above strategies and accelerate export growth
For effective export promotion in the district, the industries and traders may be classified into
three categories in each district, as given below
i. Industries /traders who are already exporting
ii. Industries / traders who are exporting through merchant exporters
iii. Industries / traders who have not yet entered the export field
Efforts will be made to upgrade industries/ traders in categories (ii) & (iii) to take up direct
exports.
Incentives for Exports from GoK:
 Exemption from payment of Entry Tax
 Refund of Certification Charges
 Refund of cost incurred for Export Consultancy/Market Intelligence Studies
 Brand Promotion and Quality Assurance
 Refund of Fee for an individual entrepreneur incurred for certification courses on Export
Management
 Support for Establishment of Common Facility Services and other Export Infrastructure
 Support for creation of Export facilitation facilities, R& D and testing service
 Market Development Assistance: (a) for South American countries assistance upto ` 1.75
lakh (b) for other countries assistance upto ` 1.50 lakh
 Reimbursement of premium paid for ECGC
 Financial assistance for MSME, SC/ST, Artisans and Women entrepreneurs
 Support for Development of exports in Gherkins, Rose Onions and Floriculture.
New Industrial Policy 2020-2025
The Government of Karnataka has announced the New Industrial Policy 2020- 25, on
13.08.2020. The focus of the New Industrial Policy 2020-25 is to build on the strengths of
Karnataka's industry and to enable it to fulfill its role as the engine of growth and to shoulder
responsibility of adding more hi-tech value and employment.
The salient features of New Industrial Policy 2020-25 are given below:
 To attract investments worth INR 5 lakh crore.
 To create employment opportunities for 20 lakh people.
 To reach third position in merchandise export in the next five years.
 To maintain an industrial growth rate of 10% per annum.
 To provide an enabling ecosystem for technology adoption and innovation.
 Focus on development and promotion of the MSME sector.
 Facilitate availability of industrial land.
 Remote tier II and III cities of the state engines of economic growth.
 Place Karnataka in the forefront of India's international trade.
 Showcase Karnataka as the "Factory of the Future" industry 4.0.
 Engage with various stakeholders to develop sector specific skill development strategy.
 Attract private investment in development of integrated multi sectoral industrial parks
and flatted factories.
 Create an environment to enhance case of doing business in the state.
 Support R&D & Technology/up gradation.
Natural Resources of Karnataka:
a) Agriculture:
Agriculture is one of the most essential attribute of Karnataka’s economy. The topography of
Karnataka such as the city's relief, soil, and climate immensely supports the agricultural
activities in Karnataka.
Karnataka's relief, soil conditions, and climate jointly contribute in growing crops in the city.
Agriculture is considered to be one of the primary occupations for the inhabitants of
Karnataka. Majority of the people in Karnataka are involved in growing crops especially in the
rural area. The major crops are millets, paddy (rice), maize, moong (pulses), groundnut, red
chillies, cotton, soyabean, sugarcane, rice, turmeric, wheat, barley, mustard, sesame, and peas.
Other cash crops sown in Karnataka apart from sugarcane are cashews, cardamom, betel
(areca) nut, and grapes.
Karnataka is also highly potential for its horticultural production and ranks second in this
aspect in India. Horticulture generates 40 percent of the total income of the State. Karnataka's
agricultural products also include raw silk which has the highest production range among all
other States in India.
Karnataka with its ten different agro-climatic zones and other bounteous natural advantages
offers immense opportunities for high growth in agriculture and allied sectors. It is imperative
that Karnataka takes advantage of the modern practices, technologies and develops strategies
to leverage the growing demand in both domestic and international market.
b) Mineral & mineral products:
Karnataka holds premier position in the country with regard to resources of Gold, Manganese
ore, Bauxite, Iron ore and Limestone.
Iron Ore
 80% of magnetite ore is available.
 Karnataka has the second largest deposits of iron ore.
 The State has over 9,000 million tonnes of iron ore resources, the bulk of which is
magnetite.
 The average production is 47 million tonnes.
 The production is mainly concentrated in Bellary/Hospet area Chitradurga, Tumkur and
Bagalkot districts.
 The Iron Ore exports of Karnataka amounts to Rs. 739 crores.
 The State is the third largest producer of Steel in the country.
Limestone
 30% of India’s total Limestone reserves is available in the State.
 Estimated resource of 51,000 million tonnes spread across the districts of Gulbarga,
Bagalkot, Belgaum, Chitradurga, Tumkur, Shimoga and Uttara Kannada.
 Average production is14 million tonnes.
Gold
 Total reserves contributed by the State is 64%.
 Karnataka is the only State producing primary gold in the country through the State
owned Hutti Gold Mines Ltd.
 The State has produced nearly 900 tonnes of gold during last 150 years from KGF &
Hutti - Maski schist belts.
 There is great potential for exploration with the state-of-the-art technology for gold,
platinum, precious and semi- precious minerals.
Manganese
 Total reserves accounts to 36.5%.
 Karnataka hosts the largest recoverable reserves of manganese ore in the country.
 The deposits of manganese ore are mainly found in Sandur schist belt (Bellary district),
Shimoga schist belt (Shimoga district), Chitradurga schist belt (Chitradurga and Tumkur
districts) and North Canara schist belt (Uttara Kannada district).
 The estimated resource is 107.36 million tonnes.
 The average production is 1.83 lakhs metric tonnes.
Granites
 Karnataka State is bestowed with vast resources of granite deposits.
 500 granite units in Karnataka constitute 50% of the granite units of India.
 The Average production of granites of the State stands at 1.96 lakhs cu.m
 Granite Exports from Karnataka stood at Rs. 4,200 crs in 2013-14.
 Granites are exported to Turkey, Netherlands, Albania, Colombia, Philippines, UAE,
Austria, Iran, Bahrain, Algeria, Malaysia, Singapore, Poland, Russia, Kuwait, Tanzania
etc.
(source: Visvesvaraya Trade Promotion Centre, Government of Karnataka)

Details of Exported Products and the countries

S.No District Products Exporting
Countries
1 Bagalkote Agricultural and Horticultural UAE, Pakistan,
commodities (Grapes, Pomegranate, Yemen, Iran, Sri
Mango, Banana, Maize Groundnut Green Lanka, Nepal,
grams, sugar, Bengal grams, Bajra), Vietnam, Burma,
Minerals and Mineral based products & Bangladesh,
Engineering products. Malaysia
2 Bangalore Rural Agricultural and Horticultural Germany, USA,
commodities (Onion, Rose onion, Flowers, Japan, Italy,
Gherkins, Vegetables), Minerals and Brazil, Malaysia,
mineral based products, Leather Products, UK, Belgium
Automobile, Engineering goods,
Electronics and Computer Software,
Readymade garments, Electricals, Silk,
Handicrafts, Gems & Jewellery,
Pharmaceuticals, Chemicals and Plastics,
Processed Foods & Handlooms
3 Bangalore Agricultural and Horticultural USA, Germany,
Urban commodities (Flowers),Leather Products, Japan, Italy,
Engineering goods, Electronics and Brazil, Malaysia,
Computer Software, Readymade UK, Belgium,
Garments, Electricals, Service sector, Thailand, Ukraine,
Gems & Jewellery, Handicrafts, Mexico, China,
Automobile, Precision Tools, Textiles, South Africa
Aerospace, Pharmaceuticals, Chemicals &
Plastics) Processed Foods & Handlooms
4 Belgaum Engineering, Aerospace, Drugs & UAE, UK, France,
Pharmaceuticals, Chemicals and Plastics, Germany,
Electronics, Mineral based products, Belgium, Sweden,
Textile, Automobiles, Agro Products USA, Italy, Hong
(Maize, Cotton, Jaggery, Sugar, Wheat, Kong, Switzerland
Sun Flower), Foundry Products and Saudi Arabia.

5 Bellary Engineering, Textiles, Electricals,

UAE, Europe,
Agriculture (Maize, Dry Chilli, Onion, etc.)
Africa, Turkey,
Processed Food, Minerals and Minerals Belgium,
based products & Automobiles. Germany, Canada,
Mexico.
6 Bidar Handicrafts, Engineering, Agriculture and USA, Japan, Spain,
Horticulture (Green Gram, Soya bean, Portugal, France,
Sunflower, Bengal Gram) Processed Food. UAE, UK,
European
Countries, Brazil,
Argentina, China
7 Bijapur Engineering, Textile, Agriculture and Netherlands, UK,
Horticulture (Pomegranate, Grapes etc.) China, USA,
Automobiles Canada, South
Africa, UAE
8 Chamarajanagar Minerals and minerals based products , USA, UK,
Engineering, Food Products Pakistan, Poland,
Morocco, Turkey
9 Chickmagalur Engineering, Agriculture and Horticulture Germany,
(Coffee, Spices, etc.) Netherland, Italy,
UK, Spain,
Australia
10 Chikkballapur Agriculture and Horticulture Products, China, Thailand,
Silk, Floriculture, Agro Food Products UAE
11 Chitradurga Agricultural and Horticultural Indonesia,
commodities (Maize, Groundnut, Malaysia,
Sunflower and Gherkins), Engineering, Philippines,
Chemicals and allied products, Mineral Vietnam
and Mineral based products.
12 Dakshina Agricultural and Horticultural South Africa,
Kannada commodities (Cashew, Spices), Europe, USA,
Handicrafts, Engineering, Marine UAE, Middle East,
products, Minerals and minerals based
products, Readymade garments,
Electronics and Computer Software,
processed foods, Petroleum and Petroleum
products.
13 Davangere Agricultural and Horticultural Indonesia,
Commodities (Rice Maize, Gherkins, Malaysia
Sunflower, Cotton , Groundnut, Onion)
Drugs and Pharmaceuticals, Engineering
14 Dharwad Engineering, Automobiles, Agriculture and Belgium, France,
Horticulture (Mango, Banana, Maize, USA, Australia,
Spices etc.) Processed Foods, Electricals, Canada, Spain, Sri
Engineering, Chemicals and Plastics, Lanka, Russia,
Readymade garments, Electronics and Turkey
Engineering Valves.
15 Gadag Agricultural and Horticultural USA, Germany,
Commodities (Groundnut, Cotton, Maize, Korea, New
Soya bean, Safflower), Automobiles, Zealand, Israel,
Engineering & Textiles Bangladesh,
Vietnam,
Indonesia,
Malaysia, Canada,
Philippines, UAE,
Belgium, Italy,
France, Canada,
Malaysia.
16 Gulbarga Agricultural and Horticultural South East Asian
Commodities (Turdal), Minerals and countries, Viz.
mineral based products (Fullers Earth & Vietnam,
Allied Products) Indonesia,
Malaysia, USA,
Singapore,
Australia
17 Hassan Agriculture and Processed Foods, France, Spain,
(Gherkins, Coffee, Spices etc.) Minerals Germany, Ukraine,
and mineral based products, Textiles, Netherlands,
Readymade Garments, Engineering, Belgium, Russia
Chemicals and Plastics, Pharmaceuticals
18 Haveri Agricultural and Horticultural USA, Germany,
Commodities (Groundnut, Cotton, Maize, Korea, New
Soya bean, Sun flower, Chilly Betel leaves) Zealand, Israel,
Bangladesh,
Vietnam,
Indonesia,
Malaysia, Canada,
Philippines, UAE
19 Kodagu Agricultural and Horticultural (Coffee, Italy, Germany,
Spices, Vegetables) Processed Foods. Spain, Belgium
20 Kolar Agricultural and Horticultural (Onion, Korea, Singapore,
Rose Onion, Tomatoes etc.) Processed Switzerland,
Food, Minerals and minerals based Argentina
products, Engineering, Chemicals and
Plastics.
21 Koppal Agricultural and Horticultural (Maize, China, Hong Kong,
Paddy, Jowar, Sunflower) Processed Food, Switzerland,
Minerals and mineral based products, Holland,
Engineering. Indonesia, Spain,
France, Italy
22 Mandya Agriculture and Horticultural Products Indonesia,
(Rice, Sugar, Paddy etc.), Engineering Malaysia
Pharmaceuticals
23 Mysore Automobiles, Engineering, Electricals and Asian Countries,
Electronics, Computer Software, Drugs Australia, UAE &
and Pharmaceuticals, Chemicals and Gulf Countries,
Plastics, Processed Foods, Agricultural and Latin American
Horticultural Commodities, Gems & Countries, Canada,
Jewellery, Handicrafts, Agarbathi, Silk, South Africa, USA,
Biotechnology, Paints, Paper Products, UK, African
Readymade Garments, Granites, Flavours Countries, Europe,
and Essence. Singapore, Middle
East countries,
Oman & Bahrain,
China.
24 Raichur Agricultural Commodities (Rice, Co􀁇on, Australia,
Sunflower, Tur, Maize, etc.) Processed Belgium, Canada,
Food Products, Precision Engineering. USA, Russia,
Vietnam, China,
Singapore
25 Ramanagar Agricultural and Horticultural Argentina, Brazil,
Commodities, (Fresh Vegetables, Fresh Indonesia, Japan,
Fruits), Engineering & Automobiles, UK, Netherlands,
Textile, Pharmaceuticals, Chemicals and Thailand,
Plastics Singapore, UAE
26 Shimoga Engineering, Textiles, Readymade Germany, Spain,
Garments, Agricultural USA, Holland,
and Horticultural Commodities China, Korea,
Japan, Singapore,
Australia, Canada,
Saudi Arabia,
Netherlands
27 Tumkur Agricultural and Horticultural products, USA, China,
(Areca nut, Groundnut, Coconut etc.), Japan, Singapore,
Minerals & mineral based products, Basic Australia, Saudi
 Chemicals, Pharmaceuticals & Cosmetics, Arabia,
Engineering, Readymade Garments, Netherlands, Sri
Processed Foods, Electricals. Lanka, Europe
28 Udupi Electronics and Computer Software, UAE, USA, UK,
Engineering, Agricultural and Japan, Singapore,
Horticultural commodities (Incl. cashews, France, Egypt,
Coconut, areca nut, Pineapple, Pepper, Saudi Arabia,
spices), Marine products, Chemicals and Syria, Israel, South
Plastics. Africa, Turkey,
Jordan, Ukraine
29 Uttara Kannada Agricultural and Horticultural USA, Poland,
commodities, Handicrafts, Marine France, Brazil,
Products etc. Middle East,
Germany, Nepal,
Spain, South
Africa, Australia.
(source: Visvesvaraya Trade Promotion Centre, Government of Karnataka)

Agricultural Exports
The potential crops are as listed, Banana, Potato, Fresh Flower, Dried Flower, Vegetable Seeds,
Juices & Concentrated, Jaggery, Ready To Eat (Ethnic Food), Individual Quick Freezing,
Cereal Preparations, Pig meat, Poultry, Dairy Products, Moringa, Millet & Millet Products,
Potato Flakes/Powder, Biscuits, Wine, Organic Products. Moreover, recently a report was
compiled towards analysis of challenges and interventions proposed for 20 Potential export
products for deeper penetration of increasing exports.
20 exports potential countries have been identified enhance the exports through
FPOs by bilateral MOUs in association with APEDA. These are : Argentina, Australia, Brazil,
China, Egypt, France, Germany, Hong Kong, Italy, Japan, Netherlands, New Zealand, Oman,
Philippines, Qatar, Russia, Singapore, South Korea, Sri Lanka ad UK.
Common bottlenecks that are faced in Agricultural Exports
a. Requirement of Area expansion at the farm level
b. Implementation of Good Agricultural Practices.
c. Improvement in harvesting practices.
d. Formation on new FPOs/FPCs/Co-operatives existing.
e. Requirement of Planting material/certified seeds and existing distribution mechanism.
f. Requirement of Recommended list of Pesticides and label claim and existing distribution
and control mechanism for use of unauthorized pesticide.
g. Pest free area.
h. Availability of electricity supply.
i. Integrated Pest and Disease Management.
j. Requirement of Up-gradation of Package of practices.
k. Present level of Organic Production and farm certification
l. Requirement of Training for the State Horti Officials/NPPO officials/ Farmers/FPOs
m. Requirement of infrastructure development (Integrated Pack house, Cold storage,
Collection centre, Testing Labs, Transportation/Reefer Van /reefer container plug-in
points, Processing unit for value added products).
Crop wise identification of the cluster and surplus available in Karnataka
1. Grapes
The major varieties of Karnataka are Bangalore blue, Anab-e-shahi, Thompson Seedless,
Gulabi, Arka Vathi, Shyam etc. Thompson Seedless is the largest (area under cultivation) table
variety that is grown in Karnataka. It is estimated that out of the total production about 55%
of the produce is of table variety while the rest are more suited for wine and juice manufacture.
Karnataka has a production base of 0.3 to 0.35 million tons of grapes while Maharashtra has
a production base of 2 million tons. Currently, Maharashtra exports about 7% of its
production. In order to match the same level of exports Karnataka should be able to export
about 15,000 to 20,000 tons per annum over a production base of 300,000 tons.
2. Pomegranate
Karnataka’s Share in the export – The production of the pomegranates in Maharashtra is
about 0.9 million tons while Karnataka has 0.13 million tons and between these two states,
80% of the pomegranate production in India is covered. If the projected export of 42000 tons
is allocated to these states in proportion of their production then Maharashtra can be expected
to export 37000 tons and Karnataka can be expected to export 5000 tons. The season for the
crop is June to October and the major regions in Karnataka are Gulbarga, Raichur, Koppal,
Bijapur, Bagalkote, Bellary, Davanagere, and Chitradurga. This region has an overlap with the
Grape growing zones in North Karnataka and the season is also complementary therefore
there is opportunity for having shared infrastructure. In one of the major districts Bijapur,
Bagalkote and Chitradurga are centers for exports and we would set up multi product pack
house for grapes and pomegranates.
3. Papaya
It is projected that the export of Papaya from Karnataka is about 5000 tons only. The cluster
to be covered consists of the following districts Bangalore Rural, Kolar, Tumkuru,
Chikkaballapura, Mandya and Mysore. The required pack house will be in an area which will
be common to grapes and other vegetables and therefore it is possible to a multi commodity
pack house facility. In addition to fresh papaya exports limited quantities of papaya pulp can
also be exported. A more significant category papaya based product is Pepin based enzymes.
4. Assorted Vegetables and Fruits
Karnataka is ranked 10th in terms of the total vegetable production in the country. The major
vegetable crops are Gourds – bottle gourds, bitters gourds, snake gourds, Drum sticks, Curry
leaves, Beans (French, Chikdi, Cluster beans), Brinjals, Cucumber, Ginger, Chilli, Elephant
Yam, Coccinia, Peas, Okra, Onion, Papaya, Pomegranate and Banana
Market assessment for these products cannot be done because of the heterogeneous nature of
the products groups, however at the aggregate level; the past volumes can be used to develop
the volume potential for these crops.
These assorted crops are exported palletized from Bangalore Airport and are done so with the
use of any cold chain. They crops are procured in the morning from markets and regions not
too far from Bangalore. During the day the goods are sorted, palletized, certified and loaded
on to the air craft’s and by late evening or early morning the goods are at the destination. Each
pallet will have an assortment of vegetables and fruits as per the order. The growth volume is
projected only for 3 years because the past records were also available for 3 years. Based on
this project it appears that for these crops Bangalore would be most suitable location for
setting up a pack house for these assorted commodities. So the pack house in Bangalore for
assorted vegetables and fruits would require an annual through put capacity of about 10000
tons by 2020. It must be noted that export of such assorted vegetables and fruits should not
be compared at a national scale. These exports typically cover produce that can be procured,
graded, sorted, palletized and air shipped within 1 day. Therefore the focus is only on locally
available produce, highly seasonal and bears little correlation with similar export happening
in the rest of the country
5. Tomato
Assessing share of Karnataka in the export growth - It is assumed that the top 3 states (in
terms of production) share 90% of the export i.e. 387,000 tons should be exported by the top
3. These states are Andhra Pradesh (3.3 million tons production), Karnataka (2 million ton
production) and Madhya Pradesh (1.9 million ton production) and the export should be
achieved in the ratio of their production. This implies that Karnataka should be exporting
about 108,000 tons.
However since Karnataka is currently a exporting only a negligible amount of produce.
Therefore it is assumed that Karnataka on a conservative basis should target to achieve at least
half of its potential i.e. 54000 tons (2.5 % of current production level) of exports in 5 years. In
order to achieve this target, a focused and planned approach in needed on the part of
Karnataka and APEDA will have to provide extensive hand holding and capacity building
support. Tomato - Top Importers USA Russian Federation Germany Croatia France United
Kingdom Pakistan Netherlands Canada Poland Saudi Arabia Lithuania Italy Other with
suitable large international and national players as well as with various state level government
bodies. Developing large base of GAP certified farmers.
The major production districts are in the southern cluster covering Kolar and to some extent
Bangalore Rural and nearby regions.
6. Cucumbers/Gherkins
India is the largest exporters of Gherkins in the world and almost the entire of the production
is in the state of Karnataka. This was a unique crop at the time of its introduction because the
product had no market whatsoever in India. So the farmers growing this product were taking
the risk that if the product did not sell, there would be not alternative revenue.
This approach is needed for other crops as well particularly where the domestic market is
already quite established e.g. cultivation of rose onions in Karnataka even when there is a
strong domestic market already. The approach for assessing the export growth potential for
Gherkin would be to assess the growth of exports and growth of international market and
assume that lower of the growth rates would be applicable to Gherkin export from India.
Based on the past performance of the global market, the past performance of the Indian
exporters it can be projected through linear progression that export volume would increase to
about 200,000 tons. Exporters of Gherkin have informed that physical infrastructure is not
currently needed, but the area of focus should be development of planting material. As of now
planting material is imported and expensive. Local agriculture research center had so far
avoided pursuing research on gherkins because it is not a critical crop for India. APEDA may
use its good office to influence the inclusion of crops of export importance into the research
programs.
7. Pineapple
Karnataka as a pineapple growing state has an advantage in catering to the western markets
because the eastern sector of West Bengal, Assam and Bihar have much larger production
bases and currently the hubs for bulk of the international trade for fresh, canned and juiced
products. In catering to the western market, the assessment export potential will be based on
production available instead of existing exports, because existing exports are negligible.
Pineapple has 7-10 days in ambient conditions and upto 15 days in cold store. The most
popular commercial pineapple variety in India is Giant Kew. Other important verities are
Queen, Kew, Mauritius, Charlotte, Rothschild, Jaldhup, Desi, Lakhat, etc. For the purpose of
exports the Md2 varieties need to be used and they are currently available in India. Developing
the export potential for Karnataka pineapples (instead of projecting for India and allocating a
share to Karnataka) for developing Pineapple exports from Karnataka (which currently
happens in small quantities with other fruits and vegetables) the regions that should be
considered are MENA (Middle East and North Africa), Eastern and Western Europe.
This approach of focusing on directly on projecting for Karnataka instead of India first and
then Karnataka is adopted because unlike the other major crops of Karnataka, the domestic
competition in Pineapples is not from the neighboring states but from the Eastern Indian
states which have different crop cycles, varietal characteristics and value chain dynamics.
Therefore clubbing Karnataka with rest of India is not advisable. The total volume of imports
in MENA, Eastern Europe and Western Europe are 0.2 million tons, o.3 million tons and 1.2
million tons respectively. Over the next 5 year period targeting 3% of the MENA market and
0.5% of total European market would be reasonable and achievable. This brings to target
export volume of 13500 tons exports from Karnataka in 5 years’ time which can be catered to
by 160,000 ton of current production.
The relevant regions in Karnataka are Shimoga, Kodagu, Uttar Kannada, Dakshin Kannada,
and Udupi.
8. Floriculture
Karnataka’s share in exports in volume terms is 7% while in value terms it is 11% while it is not
possible to separate loose flower exports and cut flower exports as they are not tracked
accordingly. This volume allocation to Karnataka is based on the assumption that given the
perishable nature of flowers, they exported from the nearest airport. So all the export from a
particular airport is allocated to that very state in which the airport is. It can therefore be seen
that of the total production of 72000 MT of cut flowers and 212,000 MT of loose flowers,
Karnataka exports only 4600 MT. The scope for growth is high but challenging due to the
highly perishable nature and exacting standards of the international market.
Assuming a positive scenario for the purpose of infrastructure planning – Since past export
based forecast is negative and the scope for volume growth is huge, an annual growth rate 1%
has been assumed in consultation with industry experts and various stakeholders. On this
assumption the exportable quantity of flowers for Karnataka would be 4900 MT up from
current 4600 MT . The major production regions for cut flowers would be Bangalore, Kolar
and the surrounding areas where as for loose flowers the region would be along the coast from
Kodagu to Shimoga and the facilities to be added would be discussed later.
9. Multi Fruit Pulp – Mango, Papaya, Sapota, Guava and Custard apple Pulp
As a major producer of mango both mango and mango pulp are potential products of
Karnataka. Currently Karnataka exports both. However, fresh mangos were exported from the
state, the real strength of the state was in mango pulp as two of its primary mango varieties
name Bangalora (Totapuri) and Banganapalli (Baneshan) are quite popular with the
processors.
Based on the past 10 years’ export trend it is estimated that total pulp export from India will
be about 186,000 tons in 5 years. It is also fair to estimate that the top 7 mango producing
states (constituting 80% of the production) will be best placed to capture this export market
as most investors are likely to set up facilities in high productivity areas.
The top 7 mango producers are Uttar Pradesh, Andhra Pradesh, Karnataka, Telangana, Bihar,
Maharashtra and Gujarat. The potential for pulp export can be taken in proportion of their
production largely because it is not known how much each state it is producing at present.
Based on this assessment, Karnataka should be exporting 23000 tons of mango pulp i.e. if
India is exporting 186,000 tons of pulp; Karnataka should be at least exporting 12.35% of it.
Mango processing unit has been proposed for basic level plant under PPP arrangement. This
can be a demonstration facility for attracting more private investors. The number of
operational plants in the region is not known. So if significant processing activity already
exists, then this project need not be taken up.
10. Medicinal and Aromatic herbs and extracts
The market for medical plants in India stood at Rs. 4.2 billion (US$ 56.6 million) in 2019 and
is expected to increase at a CAGR 38.5% to Rs. 14 billion (US$ 188.6 million) by 2026. The
total world herbal trade is currently assessed at US$ 120 billion. India’s share in the global
export of herbs and herbal products is low due to unsophisticated agricultural and quality
control procedures, lack of processing, research & development, standardization in products
and regulatory framework in trade of medicinal plants.
The export of herbs and value-added extracts of medicinal herbs has been gradually increasing
over years. In 2017-2018, India exported US$ 330.18 million worth of herbs at a growth rate
of 14.22% over the previous year. Also, exports of value-added extracts of medicinal herbs and
herbal products in 2017-2018 stood at US$ 456.12 million, recording a growth rate of 12.23%
over the previous year. The demand for herbal/value-added extracts of medicinal herbs is
gradually increasing in foreign countries, especially in European and other developed
countries.
The Government of India has taken several measures to promote cultivation and export of
medicinal plants. The National Medicinal Plants Board (NMPB) offers up to 75% subsidy to
farmers; formulates schemes and guidelines for financial assistance in various zones of
medicinal plant divisions, secured under promotional and commercial plans, which are
relevant for government and non-government associations.
The Department of Commerce has set up export promotion councils (EPCs) to promote
exports of various product groups and has assigned Shellac & Forest Products Export
Promotion Council (SHEFEXIL) to mandate exports of herbs and medicinal plants. The export
promotion of several herbal products has been assigned to Pharmaceuticals Export Promotion
Council (PHARMEXCIL). The EPCs facilitate the exporting community and undertake various
promotional measures to promote exports of their products.
Under the Market Access Initiative (MAI) Scheme of the Department of Commerce, the
EPCs/trade bodies are provided with financial assistance to participate and organise trade
fairs, buyer–seller meets (BSMs), reverse buyer–seller meets (RBSMs), research & product
development, market studies, etc.
The Merchandise Exports from India Scheme (MEIS) provides incentives to the exporting
community for specified goods in order to counteract infrastructural inefficiencies and the
associated costs of exporting products manufactured in India; thereby, giving special
emphasis to these products which are of India’s export interest and have the capability to
generate employment and enhance the country’s competitiveness in the world market.
Future of Medicinal Plants Industry in India
In India, the production and cultivation of medical plants is mostly unorganised. An equipped
supply chain management and formation of farmer associations will improve the production
and sales of medicinal plants in the country.
The sector has observed recent entries of start-ups bringing in technology up gradation. This
start-up are using precise farming techniques by integrating artificial intelligence (AI) and
data analytics for crop profiling, seed analysis for better germination, among others.
Infrastructure required in Karnataka
The current status of the exports from the state and India as a whole is minimal when
compared to the total potential available with the state to export. One of the critical factors is
the unavailability of the supporting infrastructure to facilitate smooth logistics and reservation
of food quality. Good infrastructure facilities ensure the proper delivery and safety of the
exported product along with savings in time and cost.
In Karnataka, the commodities with significant potential for export are grapes, pomegranates,
pineapples, papaya, mango pulp, sapota, tomato, gherkins, assorted vegetables (like
drumstick, lady finger (okra), various gourds, beans etc.), floriculture and maize. Although
these commodities are already being exported from the state but due to lack of infrastructure
their actual potential has yet to be achieved. The infrastructure gaps are present in the form of
non-availability of pack houses / nonavailability of refer vans for transportation of perishable
commodities, non-availability of refer containers for transport of commodities to sea ports,
pre-cooling facilities, processing facilities etc. Plugging these gaps will assist the development
of the export trade.
Export Infrastructure Created
• Bangalore is a major export centre for flowers, vegetables, fruits and other perishable
goods. Under ASIDE Scheme, a joint venture of Air India and Singapore Airlines (AISATS)
has established a coolport at a cost of `46 core.
• At Bangalore, Indian Flower Auction Board (IFAB) has been established with coordination
from Horticulture Department at a cost of ` 5 crore.
• An Organic Jaggery making unit in Belgaum district has been established with an
investment of `15.82 crore. Another unit is also approved in the State Level Export
Promotion Committee (SLEPC) for an investment of `14 crore.
• A Dry Grape (Resin) Processing, Packaging and Exporting unit has been established at
Kudchi in Begaum district at an investment of `19.32 crore.
• Cashew Technology Development Center at Kumta in Uttara Kannada district for which
an approval of investment of `10.30 crore in the SLEPC, in which GoI contributed `3.31
crore under Trade Infrastructure for Export Scheme. District Administration of Uttara
Kannda had allocated 3 acres of land free of cost for this project. The building construction
is under process.
• Modernization of infrastructure facility for marine products in Tadadi port, Kumta Taluk,
Uttara Kannada District with financial assistance of `13.34 crore.
Post- Harvest Infrastructure facilities
S.No. Location Type of infrastructure
1 Vijayapura – KIADB Cold chain facility - pack house, pre-cooling unit,
Industrial Area reefer van, storage for agriculture/horticulture
products
2 Kushtagi - KIADB Industrial Cold chain facility - pack house, pre-cooling unit,
Area storage for agriculture/horticulture products
3 Bagalkot - KIADB Industrial Pack house with receiving, washing, waxing and
Area grading, pre-cooling unit, commercial cold rooms,
ripening chambers, aril separation and packing units,
storage for agriculture/horticulture products
4 Hubballi – APMC Yard, Pack house with receiving, washing, waxing and
Amargol grading, pre-cooling unit, commercial cold rooms,
reefer vans, ripening chambers, cold
storage/warehouse for agriculture/horticulture
products
5 KIADB Industrial Area, Pack house with receiving, washing, waxing and
Humnabad, Bidar district grading, pre-cooling unit, reefer vans, ripening
chambers, cold storage for agriculture/horticulture
products
6 APMC Yard, Gadag cold storage for agriculture/horticulture products

(source: Karnataka State Agricultural Produce Processing and Export Corporation Ltd.)

Exit Points for Karnataka

The exit options for export products from Karnataka are Mumbai – Sea and Air port, Cochin
Sea Port and Bangalore Airport. Mangalore Sea Port is also an exit option used by exporters.
It needs to be noted that the preferred usage of a sea or airport is not driven by infrastructure
around the port.
It is driven by –
 Destination port – all ports cater to a limited number of destination ports
 Client’s preferred port – In case of FOB shipment clients simply provide the port in India
where they want the goods delivered
 Most exporters have long term tie- ups with shipping lines which in turn have their fixed
 Shipping / Airlines service frequency offered at the port
 The Shipping / Airlines service frequency is dependent on the volume of produce shipped.
The following calculation shows that in Karnataka, except for Bangalore cluster no other
 cluster is generating sufficient volume to justify even dedicated Cargo Freight Stations
(CFS) to be created. A CFS needs at least 1000 per annum for TEUs for viability.

So for the period ending 2020, the cluster Bijapur will depend on conventional connectivity
with Mumbai Sea and Air ports and Mangalore cluster will depend on Mangalore and Cochin
Sea port. Additional infrastructure will not lead to an increase in sea and air freight service
frequency (as volume of Agri produce is very low) and neither is it possible to change the flow
of good from any existing busy port to some newly developed port. Bangalore has sufficient
volume increase, however the district already has two ICDs and exporters are not facing any
congestion there, so the rational for new export infrastructure does not exist. Bangalore
Airport however needs a CPC (Center for Perishable Cargo) and therefore the same has been
recommended.
Existing Infrastructure - Pack Houses
Karnataka has only 4 integrated pack houses that are APEDA recognized and while the
utilisation of the pack houses are not tracked even by the owners (because capacity varies with
crop), yet the stakeholders interviewed were of the view that utilisation will not be less than
70-80% as the pack house are used for various crops round the year.
Cold Stores
All stake holders were of the view that stand alone cold stores were neither needed nor viable
unless the owner of the cold store himself is the primary user. There are 82 cold stores in
Karnataka. Out of these 3 are known to be completely non-functional.
Food parks in Karnataka
There are 5 Food Parks in Karnataka, based in Tumkuru, Jewargi, Kalaburgi dist, Hiriyuru,
Chitradurga dist, Malur, Kolar Dist and Bagalkote geared towards catering to the domestic
and export market.
The way forward
The various efforts and policy formulations of GoK and GOI have helped exporters from
Karnataka and it may result in greater opportunities for purveying credit for exports. In order
to have accelerated growth in the export sector, it is imperative to give focused attention on
strengthening export infrastructure like establishment/enhancement/modernization of
inland container depots, container freight stations, hassle-free clearance, product specific cold
storages, warehouses etc.