Friday, December 21, 2012


Criticizing multinational companies is a trait deep rooted in India which had seen how Britishers were able to bleed this country of its precious resources during their 300 years of rule. But such an attitude may not be relevant to day because there are many Indian companies which are multinational in character having operations out side the country. Also the framework of WTO regime within which India has sworn to work does not allow unreasonable restrictions on investors from member countries. Recent policy shift allowing foreign retailers to invest in India is a pointer to things to come in future. Under these circumstances the recent announcement by some Indian investors about forming a consortium for buying land in countries like Ethiopia and Uruguay and producing oil seeds and pulses should not come as a surprise to any one. 
The report quoted below does not really say much about any action taken so far but the likelihood of such mega agricultural projects, coming in technology and money starved but land rich countries, can be a distinct possibility. 

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".

In such a future scenario a larger question is whether Indian entrepreneurs will be able to cope up with the investment and working environments in the foreign countries where operations are planned. The recent experience of Indian companies in countries like Maldives, France and others does not inspire much confidence about the success of such ventures. After all India is one of the countries which does not allow large corporate players to buy land for agriculture and if one single reason for the low productivity of agricultural crops is to be cited, it is lack of technology and resources in this sector mostly dominated by millions of impoverished rural farmers. Another assumption by Indian investors in foreign countries that they will be allowed to export their production freely out of the invested country may not turn out to be true because every country invariably tries to meet the domestic food demand before allowing exports. Any how this is an experiment worth trying and learn valuable lessons for similar projects in future.


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