Solvent extractors talk food security, seek govt help

Commodity Stock News | 2009-10-28

MUMBAI (Commodity Online): In a bid to ensure food security for the country, Indian solvent extractors have sought government support to buy agricultural land abroad.

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. This has come as a part of ensuring India’s food security.

India’s edible oil imports have been on the rise. Imports of vegetable oils during November 2008 to September 2009 jumped 47% 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. 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.

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 USD 35 million for Paraguay and USD 50 million in Uruguay. In both cases, it estimates the pay-back period to be around seven years.

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.

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.
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