Solvent extractors want Govt aid to buy farmland abroad

The Hindu Businessline | 27 October 2009

M Ramesh

Chennai, Oct. 26 - The Solvent Extractors’ Association of India, a body of over 800 edible oil producing companies, is looking to buy tracts of agricultural land in South America, Africa and Myanmar.

The Association wants government’s support for this because it feels buying agricultural lands abroad (like the Chinese have done in Africa), is a part of ensuring India’s food security.

Edible oil imports

India imports of edible oils have been on the rise. Imports of vegetable oils during November 2008 to September 2009 jumped 47 per cent to 79 lakh tonnes (lt) from 54 lt during the same period a year ago. Vegetable oil imports are expected to total around 85 lakh tonnes, valued at Rs 27,000 crore, during the current season ending this month.

Edible oils import is the second largest foreign exchange drain, after crude oil.

Against this backdrop, the SEA has been looking at options for buying lands abroad for some time now. Mr B.V. Mehta, Executive Director, SEA, told Business Line that lands are available at a cheaper price in Africa, but there are concerns over “law and order” and governments nationalising property.

Myanmar is another option under consideration, but the military junt rule is a of concern to the extractors.

South America, where huge tracts of lands are available for purchase, is an option as foreign companies are allowed to buy both agricultural and forest lands.


Special purpose vehicle


The SEA has formed a consortium of 18 of its members to take the proposal forward. It intends to form a special purpose vehicle for investing in lands in South America.


For starters, the Association is looking at buying 10,000 hectares of lands in Paraguay and Uruguay. It expects that this would call for an investment of $35 million for Paraguay and $50 million in Uruguay. In both cases, it estimates the pay-back period to be around seven years.


Dr Mehta said that the Association is in talks with Indian companies to assure itself of offtake.


In this connection, the Association wants the Government’s help. The Association had earlier approached the Exim Bank of India for loan, but the bank could not give, as lending for land purchase abroad was outside its mandate.


The SEA wants the Government to amend Exim Bank’s mandate and also provide an interest subvention.


Government backing


India’s Ambassador in Argentina, Mr R. Viswanathan, calls for government backing, perhaps in terms of easy loans from Exim Bank.


“The Chinese are extending large lines of credit to facilitate entry of their companies and get access to resources. For example, they have given a $10 billion credit to Petrobras of Brazil in return for one lakh barrels of oil a day,” says Mr Viswanathan, an old hand at Latin America, who was previously


India’s Ambassador in Venezuela and Consul General in Sao Paulo, Brazil.


Not the first


SEA is not the first to aspire to buy lands in South America. The Sterling group has bought a 2,000 hectare olive farm in Argentina. Rajashree Sugars, Godavari Sugars and Renuka Sugars are considering acquisition of sugarcane estates and sugar and ethanol plants in Brazil, where Bajaj Hindustan already has a subsidiary.


Olam, a NRI-run company has bought 17,000 hectares of land in Argentina, where it grows peanuts.


According to Mr Viswanathan, cost of land in South America is cheaper than in Punjab.


The cost of a hectare of productive land is $10,000 in Argentina and Brazil, $5000 in Uruguay and $2000 in Paraguay, he says.

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