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A consortium of over half a dozen companies, primarily leading oilseed processors, under the aegis of the Solvent Extractors’ Association (SEA), is planning to acquire agricultural land in Latin America (LatAm) for planting edible oilseeds and pulses.
Earlier, these companies had plans to acquire land in Ethiopia. But, the worsening law and order, poor infrastructure and complicated government policies in the African country, forced them to move to LatAm, where these issues are well addressed.
The oilseed processors’ drive assumes significance as these companies failed to expand their business horizontally through backward integration, as a result of corporate farming not permitted in India. Despite over 60 per cent of its edible oil requirements being met through imports, the government of India refuses to grant permission to big corporate players for acquisition of land for self-driven agricultural purposes. While contract farming, involving farmers as stakeholders, is allowed, the model has not worked to anyone’s benefit.
“We are looking at Uruguay in Latin America for growing soybean and pulses with around 6,000 hectares of land on lease for a couple of years initially. If it proves profitable, we would acquire land in Uruguay for full-fledged planting,” said B V Mehta, executive director of SEA.
Mehta did not divulge the name of the consortium or the companies involved in the deal on fears of land price rise in Uruguay. He, however, confirmed that talks are in advanced stages and the Indian companies would begin soybean planting as early as next season. If successful, this would be the first entry of any Indian companies into Latin America for plantation.
SEA has conducted detailed analysis of both countries - Ethiopia and Uruguay. In comparison with Ethiopia, Uruguay is more peaceful, has sustained agriculture policy and advanced infrastructure. In Ethiopia, Indian companies would need to invest on a sustained basis for over a decade to develop the requisite infrastructure, which may or may not be profitable for them in future. Besides, the presence of pirates in neighbouring Somalia has made transportation of oilseeds from Ethiopia a risky affair.
Investing in Uruguay, which has agro climatic conditions similar or even better than Ethiopia, does not entail any of these issues.
A number of Indian companies, including S&P Energy Solutions, Karuturi, Ruchi and BHO have acquired land for both horticulture and oilseed agriculture in Ethiopia.
According to an industry veteran, land is costlier in Uruguay at $300-350 a hectare (ha) as against $5 per ha in Ethiopia. While the land in Uruguay requires no extra investment - one can begin plantation right after acquisition - land in Ethiopia is almost barren, requiring massive investment to make it fertile.
India imports oilseed from Indonesia, Malaysia and Argentina, about 60 per cent of its estimated demand of 15.5 million tonnes. But, rapid urbanisation within the country has squeezed the availability of land for oilseed plantations, forcing corporates to look overseas.