Indian firms scout for farms overseas
The Hindu Business Line | 2 December 2007

Part of forward integration process by solvent extractors

Plantation abroad
M.R. Subramani

Chennai, Dec. 2 -- A few days ago, the Varanasi-based Jhunjhunwala Vanaspati Ltd said it would spend Rs 150 crore to buy 20,000 hectares of oil palm plantation in Indonesia.

K.S. Oils, based at Morena in Madhya Pradesh, is reportedly toying with the idea of buying oil palm plantation abroad as also a few other solvent extracting companies.

Plantations spree

According to industry sources, Godrej Industries has either bought oil palm plantation or is at an advanced stage of negotiations to buy. (The company did not reply to queries from Business Line in this regard until this report went to print).

Ruchi Soya has shown interest in setting up an edible oil refinery in South America, while a Solvent Extractors’ Association delegation is currently visiting Argentina, Uruguay and Paraguay to explore possibilities of Indian companies entering contract farming in any of these countries.

“The plan to buy plantations or enter into contract farming for oilseeds abroad is a move for forward integration by Indian firms dealing in edible oils.

“With costs of producing edible oils going up, Indian firms find a business opportunity by going in for such options,” says Mr B.V. Mehta, Executive Director, Solvent Extraction Association of India.

“Buying plantation abroad will bring down the cost incurred through import of crude palm oil (CPO). Our move is primarily to cut cost price of CPO,” says Mr Alok Bohra, Purchase Manager of Jhunjhunwala Vanaspati.

Jhunjhunwala Vanaspati imports at least 20,000 tonnes of CPO every month and of this, 15,000 tonnes is for its own use, says Mr Bohra. “Actually, manufacturers don’t sell directly to buyers. They sell it to traders, who add a significant margin and sell,” he says.

Mr Mehta says apart from cutting costs, land laws in the country have also forced companies to scout abroad for various options.

Land laws

“In India, land laws are managed by the States. It is a problem even to acquire five or 10 acres, leave along buying huge lands running into thousands of acres here. But in countries in the South-East or South America, there are no such problems,” he says.

Feasibility report

The Solvent Extraction units’ team, currently visiting South America, will come up with a techno-feasibility report on carrying out contract farming by Indian companies either in Argentina, Paraguay or Uruguay.

They will mostly go in for soyabean cultivation. “Our companies could go in for contract farming in 10,000 hectares at one go,” Mr Mehta says.

The current visit is a follow-up of talks held with a team from Paraguay, which itself came about after a team of solvent extractors visited that country.

“Not just buying land, we are also toying with the idea of leasing a vessel exclusively for ourselves to ship CPO,” says Mr Bohra.
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Source: The Hindu Business Line