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CHAPTER-1INTRODUCTION

1.1 Background

Shrimps and prawns sell among the most important internationally traded fishery

products, with a value of $10 billion, or 16 per cent of global fishery exports.

Shrimp/prawn fisheries generate substantial economic benefits, especially for many

developing countries. World production of shrimps/prawns, both captured and

farmed, is about 6 million tonnes, of which about 60 per cent enters the global

market. Globally, about 60 per cent of shrimp/prawn production comes from fishing,

while 40 percent is from farming (Chopin, 2009). In this study, the term

“shrimps/prawns”, are used synonymously to refer to Harmonize System Code (HS

030613 - Frozen shrimps/prawns). Hence forth this chapter presents an overview of

world fishery sector, with special relevance to the structure, character and production

and export capacity of Indian marine shrimps/prawns sector. It also analyzes the

state-wise availability of shrimps/prawns in India and international scenario. It

attempts to discuss the health benefits of this product and prospective areas for

research; conceptualizing the research model. The chapterization plan of the thesis

and summaries of the main issues discussed in these chapters, which is provided

can bring out the rationale behind this method of organizing the thesis.

1.2 Overview of World Fishery Sector

The total world supply of capture fisheries and aquaculture is 142.29 million tones.

Out of that for consumption purpose supplied to the world with about 113 million tons

of food fish in 2007 approximately, providing an apparent per capita supply of 16.7

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kg (live weight equivalent), which is among the highest on record. Of this total,

aquaculture accounted for 52.6 per cent. Overall, fish provided more than 6.6 billion

people with at least 16.7 per cent of their average per capita animal protein intake as

given in Table 1.1. (FAO,2010).

It is observed from the Table 1.1, the fish consumption since a decade is

continuously surging. This indicates, there is a huge market for this product

worldwide.

Table 1.1: Total World Fish Production and Consumption (Million Tonnes)PRODUCTION 2002 2003 2004 2005 2006 2007 2008

INLANDCapture 8.41 8.62 8.6 9.38 9.76 9.97 10.22Aquaculture 21.73 23.07 25.18 26.84 28.7 30.67 32.89Total inland 30.14 31.69 33.78 36.22 38.46 40.64 43.11

MARINECapture 82.58 79.6 83.77 82.68 79.96 79.92 79.52Aquaculture 15.05 15.84 16.72 14.47 18.65 19.24 19.66Total marine 97.63 95.44 100.49 97.15 98.61 99.16 99.18

TOTAL CAPTURE 90.99 88.22 92.37 92.06 89.72 89.89 89.74TOTAL AQUACULTURE 36.78 38.91 41.9 41.31 47.35 49.91 52.55TOTAL WORLD FISHERIES 127.77 127.13 134.27 133.37 137.07 139.8 142.29

UTILIZATIONHuman consumption 100.1 102.2 104.2 108 111 113 -Non-food uses 28.3 25 30 29 26.1 26.7 -

Population (billions) 6.3 6.4 6.4 6.5 6.6 6.62 6.70

Per capita food fish supply (kg) 16 16.3 16.2 16.4 16.7 16.69 -(Source: FAO , Aug, 2010)

1.2.1 World Production Scenario

World catch of shrimps/prawns is about 3.4 million tons per year. Asia is the most

important area for shrimp/prawn fishing. Altogether over 100 countries export

substantial quantities of shrimps/prawn, but Asia is one of the leading regions.

Shrimps/prawns are reared in countries of Asia which possess tropical climates.

China, together with four other Asian countries, accounts for 55 percent of the world

catch (Chopin, 2009).

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1.2.2. World Marine Capture Fisheries Production

Global marine capture production was 89.74 million tons in 2008 (FAO,2010). China

was the leading country for marine capture fish production in the year, whereas India

is ranked sixth in terms of same. The top ten major countries and their production

status are given in Fig 1.1(FAO,2008).

0 2 4 6 8 10 12 14 16 18

China

Peru

USA

Japan

Chile

India

Russian Federation

Thiland

Philippian

Million Tonnes

(Source: FAO 2008)Figure 1.1 Marine and inland capture fisheries: top ten producer countries (2006)

1.2.3 Production Capacity of Asian Countries

Table 1.2 indicates that among all Asian countries China has the highest production

capacity of marine shrimps/prawns, followed by Thailand, Vietnam, Indonesia and

India comes under the top five positions respectively. China’s share is quite high,

and it is almost equal to the sum total of the Thailand, Vietnam, Indonesia and India,

as observed from Table 1.2. The production status of other continents involved in

has been given in Appendix I. Though the few Asian countries have a higher

production capacity of cultured shrimps/prawns, the benefit is not so high due to the

demand of organic product (captured shrimps/prawns) in the global market.

1.2.4 International Market Trend

In parallel with the increase in production, international trade has continued to grow,

and at an accelerating rate in recent years. About 38 per cent of world fish

production is traded internationally. In 2007, total exports of fish and fishery products

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Table 1.2: Production of Marine Shrimps/Prawns in Asia

were US$ 93.52 billions in value terms. Developing countries, as a whole, supplied

approximately 59 per cent. Shrimps/prawns as the main fish commodity traded in

value terms, accounting for about 16% of the total value of internationally traded

fishery products, as observed from annexure I. In 2007, more than 60 per cent of the

total world import value was concentrated in developed countries, in particular in

Japan, the USA and in several EU countries. Japan was the major importer

accounting for about 11 per cent of total import value. USA was the second main

PRODUCTION OF ASIA IN 1,000 TONNES PER YEAR, ROUNDEDYe

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Chin

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Viet

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Indo

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Indi

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Bang

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Phili

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1985 40 10 8 25 13 11 29 0 171986 83 12 13 29 14 15 30 0 451987 153 19 19 42 15 15 35 0 801988 199 50 27 62 20 17 44 0 341989 186 90 28 82 28 18 47 0 221990 185 115 32 84 35 19 48 0 151991 220 161 36 116 40 20 47 0 221992 207 185 37 120 47 21 77 0 161993 88 223 39 117 62 28 86 0 101994 64 264 45 107 83 29 91 0 81995 78 259 55 121 70 32 89 1 111996 89 238 46 125 70 42 77 2 131997 103 225 45 127 67 48 41 2 61998 143 250 52 97 83 56 38 2 51999 170 274 55 121 79 58 39 5 52000 218 309 90 118 97 59 41 5 62001 304 279 150 129 103 55 42 6 82002 384 264 181 137 115 56 37 7 102003 789 330 232 168 113 56 37 19 102004 935 360 276 218 118 58 37 30 82005 1025 401 327 266 131 63 39 49 82006 1242 501 349 326 132 65 40 60 7

Entries in italics indicate gross estimates in the FAO databases Bolded numbers indicate somerecognizable disease events. (Source: FIGIS; FAO databases, 2007)

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importer with a share of 9 per cent, followed by Spain, France, Italy, Germany and

the UK (FAO, 2010).

1.3. Overview of Indian Marine Shrimps/Prawns

1.3.1 Structure

India has a long coastline (8118 km) and a vast continental shelf. The brackish water

resources are represented by mangrove swamps, estuaries, backwaters, lagoons,

tidal creeks etc. and out of the estimated potential area of 1.2 million ha, only 0.16

million ha (13%) is utilized for farming. About 60 per cent of the farmed area is under

scientific farming and 40 per cent under traditional farming (Vasudevan, 2002). The

growth of shrimp farming was slow in the decade of eighties when traditional farming

accounted for a production of 30,000MT. The area under scientific farming increased

to 20.2 per cent (10,100ha) and production by 86.67per cent (13,000MT). An

exponential growth in farming took place from early nineties due to the attractive

monetary gains.

1.3.2 Special Characteristics

There are more than ten species of saltwater shrimps/prawns which are reared

commercially throughout the world. Tiger prawns/Black Tiger (Panaeus Monodon)

and White Fasho (P. Orientalis) are the most important species of shrimps/prawns

reared in Asia. According to MPEDA the Indian prawn is a unique product, for the

last 10 years. The Indian seafood industry is one of the most important segments of

Indian economy in terms of output, foreign exchange earnings and employment

generation. Contribution of fisheries to Indian GDP is about 1.3 per cent (2002-03)

which forms about 5.2 per cent of the agricultural GDP (MPEDA, 2008). India has

been the world's leading producer of shrimps/prawns for its physical, chemical and

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biological properties with the bulk of production coming from offshore landings.

International shrimp/prawn exporters including Indian exporters are concentrated in

the US, Japan and Europe market, as these countries are import maximum (Chopin,

2009).

1.3.3 Production and Export Capacity (Capture from Natural Resources)

A fluctuate trend has been found for capture shrimps/prawns from the Indian coasts,

which is illustrated from Figure 1.2. From 2004 to 2006 it seems that, the landing of

shrimps/prawns (HS- 030613) (000’ tonnes) is almost flat, whereas from 2006 on

ward the figure of landing is continuously increasing. In the year 2000, the export

trade value as well as the unit value realization (UVR) was significantly high (Table

1.3). Whereas the quantity (million tones) of the shrimps/prawns (HS- 030613)

exported was comparatively less for that year.

Similarly, Figure 1.3 illustrates the world export share (%) of frozen shrimps/prawns

(HS- 030613). The per cent share of world export sharply declined from year 2000--

20081. The reason for this fluctuating trend could be due to the product standard,

high competition in the global market or lack of appropriate marketing strategy.

Source: CMFRI (2011)Figure 1.2: Estimated Marine Shrimps/Prawns Landings in India (In MT)

1 In 2007 India lose the entire USA (14% of the total trade) market due to antidumping.

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Table 1.3 India's Export to World (Marine Shrimps/Prawns)

Source: COMTRADE, WITS (2011Figure 1.3: Share (%) Export of MarineShrimps/Prawns of India to World

1.4 Availability of Shrimps/Prawns in India

Traditional shrimp farming is an age-old practice in India going on in about 50,000

ha, representing 36.23 per cent of cultivated brackish water area. Farming takes

place mainly in the states of West Bengal (27.18%), Kerala (7.03%), Karnataka

(1.71%) and Goa. Till mid eighties, only mixed varieties of shrimp from traditional

farming contributed for cultured shrimp (

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1.5 State-wise Shrimp/Prawn Production of India

1.5.1Type of Shrimps/Prawns Available in Indian Coasts

Large varieties (species) of shrimps/prawns are found in the Indian marine water.

Table 1.4 provides the details of the species and the coastal lines where they are

found (MPEDA, 2009).

Table 1.4: Type of Shrimps/Prawns Available in IndiaTrade Name Distribution StatesTiger prawn (Penaeus monodon) East coast and South-west coast West Bengal and OrissaWhite Prawn (P. indicus) Entire west and south-east coast Kerala and KarnatakaFlower prawn (P.semisulcatus) East and west coasts Karnataka, Goa, Maharashtra

and GujaratBrown shrimp Metapenaeus dobsoni West and East coasts Kerala and KarnatakaBrown shrimp (M. monoceros) West and East coasts Andhra Pradesh and Orissa

King prawn (M. affinis) Throughout the west coast andcertain parts of East coast

Maharashtra and Kerala

Marine shrimp (Parapenaeopsisstylifera)

Both the coasts but more inSouth-West coast

Kerala and Karnataka

Jawala (Acetes indicus) North-west and North-Eastcoasts

Maharashtra, Gujarat, and ofAndaman and Nicobar Islands

Deepsea shrimp (Solenoccera sp) South-West Coast

1.5.2 State-wise Details of Shrimp/Prawn Production

Table 1.5 gives the clear picture of all marine shrimps/prawns producing states’

status where Orissa, Tamil Nadu, Maharashtra and Gujarat are the leading states

(MPEDA, 2007).

Table 1.5 State-wise details of shrimp Production during the year 2003-04Sl.No.

State Potential Areaavailable (Ha)

Area Developed(Ha)

Area underCulture (Ha)

Production(MT)

Productivity(Mt/ha/Yr,)

1 West Bengal 405000 50405 49925 29714 0.602 Orissa 31600 12880 12116 12390 1.023 Andhra

Pradesh150000 79270 69638 53124 0.76

4 Tamil Nadu 56800 5416 3214 6070 1.895 Kerala 65000 16323 14029 6461 0.466 Karnataka 8000 3435 3085 1830 0.597 Goa 18500 1001 963 700 0.738 Maharashtra 80000 1056 615 981 1.609 Gujarat 376000 1537 1013 1510 1.49

Total 1190900 171320 154600 112780 0.73

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1.6 Health Benefits

The importance and benefits of a low fat diet have received greater attention only

during two decades. Eating shellfish are beneficial to health since they are very rich

in vitamins and minerals, at the same time as very low in fat. Fish and shellfish also

contain Omega 3 Polyunsaturated acids, which cannot be produced within the body.

1.6.1 Health Benefits of Omega 3 Polyunsaturated Acids

There is clear evidence that some Omega 3 fatty acids reduce the risk of heart

disease, blood pressure, blood fats and possibly even cholesterol. Furthermore,

omega 3 has been shown to aid in brain development and intelligence, which is why

expectant mothers are advised to eat omega rich food during the last trimester. It

also helps combat depression and even schizophrenia, aid in nerve and eyesight

development. Finally, Omega 3 has been demonstrated to aid arthritis patients.

Details of the health benefit by having shrimps/prawns are provided in Appendix II.

1.6.2 Composition of Nutrients in Marine-water Prawns

Composition of nutrients of sea prawns are provided in Table 1.6. The main

processed shrimp species are generally giant tiger prawn, Indian white prawn,

banana prawn, Parapenaeopsis, etc. and the products are whole frozen, frozen

preliminary processed, ready processed (value added and mixed processed) and

canned .

Table 1.6: Composition of Nutrients in 100g of Edible ProductComposition of nutrients in 100g of edible product

Proximate composition Minerals Vitamins

Kcal g mg mg

Calories Moisture Protein Lipid Glucid Ash Calcium Phosphor Iron A B1 B2 PP

82 79 18 0.9 0.9 1.4 79 184 1.6 20 0 0.1 2.3

Source: http://www.shellfish.org.uk/shellfish_diet.htm ( 8/4/2008)

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1.7 Need for Research

The current competitive advantage that Indian seafood (marine shrimps/prawns)

sector have in global market is due to a variety of factors including good factor

endowments and presence of product characterized by high demand, which

guarantees that a fixed market share of E.U., Japan, USA, Canada and UAE

markets. This is a quota free market access product for India. This indicates, the

Indian seafood (marine shrimps/prawns) sector will have an opportunity to increase

the rate of export growth (and thereby the global market share) provided it is able to

perform better than the seafood (marine shrimps/prawns) industries of other

competing countries like China, Thailand, Vietnam and Indonesia. In this context, it

becomes increasingly important to understand the extent to which national (or

macro) level competitive ability of the production, processing, value addition and

SPS measures of this sector which facilitates or inhibits export growth (marine

shrimps/prawns) in the respective countries. It is also equally important to study

whether there is a relationship between internal capabilities (such as ability to control

cost; ability to maintain a high and consistent quality; ability to add value throughout

the value chain etc.) of individual seafood exporting firms and their export growth.

This study could help seafood (marine shrimps/prawns) exporters, Industry

Associations and the Government to formulate appropriate action plans to increase

and sustainable global competitiveness in the quota-free era. Keeping this in view

the research problem and the research objectives are explained in the next section.

1.8 Research Problem Statement and Research Objectives

The export growth of the Indian seafood (marine shrimps/prawns) industries

depends on the following parameters- (a) the challenges posed by the international

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business environment, (b) the internal capabilities of individual firms to face these

challenges both individual and together, (c) the collective capabilities of a coalition

of international related firms to jointly face these challenges and (d) the ability of the

Indian Government to stimulate growth by creating a business friendly macro

environment.

The research objectives are as follows:

i. To analyze the patterns of growth in global demand for Indian marine

shrimps/prawns through analysis of the demand trends in major importing

countries.

ii. To identify India’s major competitors in its marine shrimps/prawns export

category and to compare their export competitiveness based on selectived

national level capability indicators.

iii. To find out whether these capabilities are present in large Indian firms who

have shown high export turnover in terms of Unit Value Realization (UVR) for

the period of 2001-2008.

iv. To determine whether there is a significant statistical correlation between any

of these capabilities and (a) net exports growth and (b) net profit growth of the

marine shrimps/prawns industry.

v. To identify the factors that Indian industries are likely to concentrate on in

order to achieve higher export growth and UVR in destinated market in the

long-term.

vi. To create efficient marketing strategies so as to compete with the developed

country as it is continuously expanding.

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1.9 Research Model

Figure 1.4 conceptualizes the model used in this research to understand the national

and international challenges as well as the firm level capability of Indian marine

shrimps/prawns sector. The inner most circle represents the dependent variable, viz.

sustainable export growth of Indian seafood (marine shrimps/prawns) industries. The

independent variables in the international business environment that could affect the

export growth and UVR of Indian seafood (marine shrimps/prawns) industries have

been visualized in the outer most circle of the figure. The variables are (a) market

access; (b) competitiveness of Indian seafood (marine shrimps/prawns) (c) changing

demand trends; (d) non-tariff barriers (NTBs); and (e) intra-regional export growth

within trade blocs. The independent variables in the national business environment

that could affect the export growth of Indian industries include government policy,

infrastructure, factor endowments, development of related industries, and

sophistication of domestic buyers and extent of local competition. These variables

can either be a challenge or a capability for the nation depending on whether they

favour the growth of exports for or not. Henceforth, these variables need to be

compared with corresponding variables in the national business environments of

other net exporting competing countries for same product. Thus, these variables

have already been included in the competitiveness of seafood (marine

shrimps/prawns) sectors of competing countries. The firm level capabilities, that

could affect export growth of Indian seafood (shrimps/ prawns) sector and also the

UVR include, (i) quality consciousness; (ii) cost control; (iii) supply capacity; (iv)

economies of scale; (v) reliance on direct marketing and sub-contracting; (vi) value

addition competence; (vii) compliance with international labour and organic

standards; (viii) effective use of Information Technology (creating product database,

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Figure1.4. Conceptual Model

CHALLENGES OF INTERNATIONAL BUSINESSENVIRONMENT

Market Access Changing Demand Condition Relative Competitiveness in Internal level Non Tariff Barriers Trade Blocs

NATIONAL LEVEL CHALLENGES Infrastructure High Competition in Nations Level Government Policy Capital Resources Development of Processing Industries Sophistication

FIRM CAPABILITIES Market Focus Cost Control Quality Consciousness Economies of Scales Direct Marketing Value Addition Marketing Diversification

GROWTH OF MARKETSHARE & UVR OF INDIAN

MARINE FROZENSHRIMPS/PRAWNS

Cluster Dynamics Brand Development Strategic Alliances Advertisement &

Promotion Ability to Comply with

International Standards

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websites); (ix) market diversification; (x) brand development; (xi) market focus; (xii)

strong advertisement and promotion and (xiii) product innovation. The inter-firm

capabilities include (a) strategic alliances and (b) trust and cooperation. A

combination of some of these capabilities will enable a sector to successfully face

the challenges of the changing business environment.

1.9.1 Constructs Used in the Research

This model attempts to explain the various challenges faced by Indian seafood

(marine shrimps/prawns) exporters and the capabilities required at the firm, inter-firm

and international level to successfully combat these challenges.

Concept of “challenge” used in this study: The seafood (marine shrimps/prawns)

sector is a sellers market , where there are a large number of buyers and relatively

fewer producers. The Indian marine shrimps/prawns are very sophisticated and

costly product. But now-a-days the countries like Vietnam culturing and exporting a

chief variety of prawn called “Vannamei” prawn, which drags buyers’ attention. In this

study, the various challenges include: (i) operating in a quota-free environment (ii)

coping with sanitary and phyto sanitary (SPS) and NTB measures, (iii) creating

product identity ( using the country of origin), and (4) keeping pace with the growth

strategies adopted by other competing countries.

Capability (when country is the unit of reference): The term “Capability” is used in

this study to mean the competitive ability of marine shrimps/prawns exporting nation

to show higher export performance (in terms of Unit Value Realization) than its

competitors on account of certain macro advantages that the nation may have.

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These include both the natural factor endowments2 of a country and the capability of

the government to envision and implement an industry-friendly policy.

Capability (when industry is the unit of reference): In this study, a industry’s

capability is defined as the ability of an industry to initiate or react to strategic moves

and to a deal with environmental or industry events that occur (Porter, 1990).

Capabilities include processing, product development, operations, value chain

integration, all aspects of marketing and customer service and organization design

(Miller et al., 2000).

1.10 Organization of the Thesis

In a sentence, the study integrates the findings of secondary research (literature

review and analysis of secondary data) and the findings of primary research (at the

industry level). The study has been organized in the following manner.

Chapter one introduces the background of the subject, viz. challenges and

capabilities of the world marine fisheries sector as well as the Indian shrimps/prawns

export sector and also discusses the research objectives, problems and the research

model.

Chapter two provides an extensive review of literature of the various issues being

considered in the study. It tries to cover the definitions of various terms that are

analyzed in this study, identifying the research gaps.

Chapter three desirable research methodology used in this study. The analysis is

based on secondary data and primary data. Secondary sources accessed include

MPEDA (July 2008), WITS COMTRADE (June 2008), Prowess (July 2008)

2 Natural resources for capture and culture of marine shrimps/prawns .

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database, FAO (May 2010). The primary data has been obtained from the marine

shrimps/prawns exporters. A qualitative, in depth, exploratory approach was

adopted. Methodology used was a structured questionnaire supplemented by

telephonic discussions.

Chapter four discusses the global demand for Indian shrimps/prawns and identifies

its global competitors. This chapter narrates the country-wise comparative

advantage in seafood sector, as well as identifies the factors contributing in

competitiveness of this sector.

Chapter five discusses the enhancement of the Unit Value Realization (UVR)

growth and also market sustainability of Indian marine shrimps/prawns, through the

possibility of introducing branding. The analysis is based on some national and

International case studies and concluded based on the empirical analysis.

Chapter six discusses the market share enhancement by creating proper

awareness through advertisement and promotion activities respectively. This chapter

also analyzed based on both case studies of leading national and international

commodity exporting industries and empirical analysis.

Chapter seven focuses on idea of value addition by strategic alliance of India with

other competitive countries, based on some national and international case studies.

The variables facilitating the strategic alliance are identified through the opinion

study of the exporters

Chapter eight summarizes the findings of the study and discusses its implications

on the future of the marine shrimps/prawns exports from India. The limitations of this

study and the scope for future research are also brought out.

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1.11 Concluding Remarks

This chapter has provided an insight into the general characteristics of the global

marine shrimps/prawns industry and the unique features of the Indian marine

shrimps/prawns export industry. Many of the issues introduced in this chapter have

been analyzed at length in the subsequent chapters of this thesis. This chapter has

also discussed the need for research and has introduced the research objectives

and the conceptual model used in the research. A review of literature covering

various research issues is reported in the next chapter.