India: Edible oil industry eyes offshore cultivation

Economic Times | 24 July 2009

Ratna Ganguli, ET Bureau

KOLKATA: The edible oil industry, which has been trying over the past couple of years to venture into oilseeds cultivation in Paraguay and Uruguay, but could not make much headway due to high cost of finance, is charged up again to take fresh initiatives to realise the dream project.

The trigger comes from falling farm land prices in those two Latin American countries. This has prompted the industry’s representative body Solvent Extractors’ Association of India (SEA) to restart negotiations with ICICI

Bank, asking for a Rs 150 crore loan for the project.

The loan amount has been sought to part finance the proposed investment for offshore cultivation in those two countries, initially estimated at Rs 200 crore. Farm land prices have dropped almost 30% in those two Latin American countries over the past three-four months in response to the gradual decline in global soya oil prices.

“With soyabean being the dominant crop in Uruguay and Paraguay, decline in soya oil prices in the global market from $1,500 a tonne in January this year to $700 per tonne in June, has subsequently brought down farm land prices by now,” SEA president Ashok Sethia told ET.

This has thrown open a tremendous opportunity for Indian oil companies to start buying land in those Latin American countries, which SEA is trying to point out while re-negotiating for loan with ICICI Bank. “This time around we are hopeful of a positive response from ICICI Bank, especially in view of the UPA government’s resolve to ensure food security for all in the country,” said Mr Sethia.

Though a 15-member consortium of stakeholders has been formed to drive offshore cultivation, SEA has been entrusted to negotiate with banks initially. Led by Pune-based Pranav Agro Industries, the consortium consists of 13 other vegetable oil companies including Ruchi Soya Industries, KS Oil, Jhunjhunwala Vanaspati, Gujarat Ambuja Export and Bhatinda Chemicals. State Trading Corporation (STC) has been included in the consortium as a public sector partner.

The idea about trying oilseeds cultivation in those countries struck the industry after SEA took a delegation to those countries two years ago. It has received good response from the industry as well as the government in view of shrinking land in the country for agriculture purpose.

The plan is to start cultivation of soyabean and sunflower in Latin American countries in 10,000 hectares to start with, which are proposed to be either bought or taken on lease. The crop grown in these farms would then be shipped to India. A special purpose vehicle is planned to be formed to implement the project.

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The trigger comes from falling farm land prices in those two Latin American countries This has prompted SEA to restart negotiations with ICICI Bank, asking for a Rs 150 crore loan for the project. Loan amount has been sought to part finance the proposed investment

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