Acquiring farmland abroad

Financial Express | 16 June 2010

by SANJEEB MUKHERJEE

The first meeting of the working group on agriculture was held recently. The group comprising the CMs of Haryana, Punjab, West Bengal and Bihar is one of four such working groups constituted by the PM to offer tangible solutions to the entire gamut of issues concerning food prices. It has proffered various suggestions to bridge the yield gap in key crops (particularly oilseeds and pulses, which have been the main drivers of runaway food inflation), strengthen input delivery mechanisms, deliver marketing reforms, address issues related to labour and land and so on.

While most suggestions pertain to broad policy initiatives to boost output, what stands out is the emphasis on genetic breakthrough in pulses and oilseeds and the emphasis on encouraging private companies to shop for land in countries like Canada, Myanmar, Australia and Argentina to grow crops under long-term supply contracts. Arrangements with Asean countries for securing oilseeds supply have also been suggested. The objective is to guarantee at least 2 million tonnes of pulses and 5 million tonnes of edible oils on a long-term basis. The suggestions are significant, given that land for agricultural purposes is shrinking every year. So, scouting for land is a good idea as local pulses output falls short of consumption by 25% and the difference between production and consumption is almost 50% in the case of oilseeds.

Some companies have been looking for land outside India to grow edible oil bearing crops and there are reports of Indian firms signing commercial contracts through leasing of land for commercial agriculture purposes in Africa. The big bottleneck that these companies face is bank funding, as these projects are not classified as investments in a foreign country in the strictest sense. In fact, a group of edible oil processers have been lobbying hard for a slight change in the banking rules, which would enable them to get easy finance to purchase farmlands abroad as prices have moved up in the last few years because of competition from other countries. This is a fact that the working group needs to consider in the future.

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