India moots tie-up on 'contract farming'

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Times of Oman | 12 December 2010

Photo: REUTERS/Ajay Verma

By A. E. James

MUSCAT: Oman could strengthen domestic availability of food grains by entering into 'contract farming' with Indian farmers, a senior Indian government official suggested here yesterday.

"Indian law does not allow foreign companies to buy land there and therefore, Omani companies can enter into a contract farming relationship for producing the type of crop they want," Montek Singh Ahluwalia, deputy chairman of Planning Commission, told Times of Oman in an exclusive interview.

"We have identified from our side a couple of companies that have indicated that they would be interested in tying up with Omani investors to get into contract farming arrangement," he said, adding, "The (Omani) companies can even specify the manner in which they want to produce the crop".

Ahluwalia, who was in Muscat to sign an agreement to approve a report on nine areas of cooperation for direct investment between the two countries, added that agriculture is an important area for Omani government to invest.

An Australian consultancy firm, which was recently assigned by the Oman government for conducting a study to find ways to strengthen domestic availability of food grains, recommended for investing in agricultural fields in a country from where Oman can easily import its produce as part of a comprehensive plan to ensure food security.

"We feel that there is scope for bringing Omani investment into (India) for producing rice through contract farming system."

Ahluwalia also noted that Oman India Fertiliser Company (Omifco), a joint venture equally owned by Oman and India, can be a vehicle of investment in fertiliser sector in a third country.

"We are interested in investing in fertiliser projects within India and outside. When we invest abroad, it is linked to availability of raw materials. In the case of Oman, additional natural gas (feedstock) is not available. But it is available elsewhere. However, it is up to the Omifco board to take a final decision," he explained.

The Indian official also said that Omifco, which is an iconic venture for India, is keen to expand production capacity. "It depends on whether additional gas can be made available to the project," he said.

He said that an Omani delegation will visit India to discuss on a recent proposal from Oman Oil Company to invest around $3 billion for reviving several sick fertiliser projects in India that are downed shutters now.

"There are several fertiliser projects that have to be rehabilitated. We are waiting for an Omani team to visit India," he informed.

Ahluwalia said that the $100 million-Oman India Joint Investment Fund, which will be increased up to $1.5 billion, will commence investment by mid-December.

"Our expectation is to enhance the corpus to $1.5 billion, which will depend on the pace at which the fund finds investment opportunities.

"If the fund invests its corpus in stock market, they can start investment at any time. But if they look for certain long-term investments in good projects, it will take some more time. Many projects (in India), which started with borrowed funds from banks, are looking for equity investments, probably to reduce their debt," he said.
Original source: Times of Oman
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