By Kevin Roepke, U.S. Grains Council Regional Director for South and Southeast Asia

In recent months, India has become a major importer of U.S. ethanol – the sixth largest buyer for January through November of 2015. Now, the country appears to be in the market for corn.

To meet its needs this year, India started off 2016 with a tender to import corn. If traded, this would represent the first commercial-scale importation of the grain in 16 years. However, serious challenges remain to ultimately getting corn on the shores of the subcontinent.

India has commissioned PEC, a state-owned enterprise, to handle the official tender, expiring Jan. 14 and with only end-users able to apply for import quotas. This initial tender sets forth a quantity of 320,000 metric tons (12.6 million bushels), but U.S. Grains Council intelligence reports the actual deficit in the country is closer to 700,000 tons (27.6 million bushels).

Unfortunately, myriad of non-tariff trade barriers could derail the whole process. A rigid and draconian stance on transgenic material is a major challenge to the point that negotiations were slowed for more than a month as regulators butted heads with traders over the interpretation of non-genetically modified organism (non-GMO).

The Council is a vigilant and steadfast supporter of free trade and promotes a scientific understanding of transgenic crops, so we are closely examining this market and how we can assist Indian corn users who are taking a step in the right direction by considering imports as a solution to deficits.

Later this month, we will host a series of roadshows throughout India featuring other developing countries and their success stories with the cultivation and importation of GMOs. The timing is right for this series as certain unavoidable situations take their hold on India, and the country is forced to deal with problems through trade.

The government of India wishes to adhere to a strict zero tolerance policy on GMOs, despite the facts that this is impractical and even GMO-wary Europe has a 0.9 percent low-level presence (LLP) policy. Many traders and analysts warn that no country can guarantee a cargo is 100 percent free from genetically-engineered material – adding a substantial amount of risk to the tender.

Given the risk, sorghum would, at least on the surface, seem like a reasonable alternative because there are no commercially-cultivated GMO varieties of the crop. However, India carries a 50 percent import duty on sorghum. Moreover, with no tariff rate quota (TRQ) in place, substituting sorghum would require some sort of temporary concession of duty, a tough ask.

GMOs aren’t the only sanitary and phytosanitary (SPS) roadblocks for importing corn into India. Fumigation appears to be another major issue of consternation as the tender calls for mandatory fumigation exclusively by methyl bromide – a toxic fumigant that is extremely restricted and expensive.

The United States and India, as well as 195 other countries, are signatories to the Montreal Protocol, which commits to phasing out substances like methyl bromide. Certain exemptions to various products and developing countries leave the door open for its continued use, although it is extremely limited and inefficient in addition to dangerous.

In addition, once the corn is imported, handlers and end-users will have to bag it at port, adding unnecessary extra cost.

Despite the numerous challenges, substantial import arbitrage possibilities remain due to the lack of domestic availability. As of press time, the Council has learned of 15 offers, indicating good industry participation, with prices ranging from a low of $192 CIF (cost, insurance and freight) to Kandla (origin Ukraine) to high of $245 CIF (origin France).

While some companies chose to put in conditional offers, others opted not to and will rely solely upon the certificate guaranteeing non-GMO varieties from the country of origin’s competent authority. The current price of corn from a starch plant in Gujarat is approximately 16,000 rupee per tonne ($237.39 per ton), while even after bagging, fumigation and inland transportation, the imported offers are still more than 1,000 rupees per tonne ($14.89 per ton) cheaper, providing good arbitrage incentive.

Despite all of these issues, we are confident that as India faces new challenges, it will be forced to deal with problems through trade. The 2016 Climate Risk Index, recently ranked India as number 10 on the list of countries most affected by climate change. Between scorching droughts and catastrophic monsoons, India too often sees itself in feast or famine mode. Couple that with one of the world’s largest feed production industries and a highly-developed starch industry to support textiles production, and there are likely to be increasingly serious bottlenecks in the future. The Council is ready and excited to work with Indian buyers and end-users to mitigate these challenges and achieve greater food and feed security.