FDI For Rubber, Coffee Brewing

New Delhi, September 23: | Updated: Sep 24 2003, 05:30am hrs
The Centre is considering a move to permit foreign direct investment (FDI) in the coffee and natural rubber sectors. For this, it has sought the views of three concerned state governments Kerala, Karnataka and Tamil Nadu before deciding the foreign equity level to be permitted. In the case of tea, 100 per cent FDI is already allowed under the automatic route, subject to foreign companies divesting 26 per cent of their equity in favour of Indian partners within a period of five years.

Commerce ministry officials say the main reason for initiating consultations with the three states is that unlike tea, which is largely corporatised, coffee and rubber sectors are dominated by small holdings/estates.

They add that considering the predominantly land-based activity in the tea sector, the government has attached another condition while permitting FDI. Foreign companies have been debarred from future land use change without obtaining prior and specific permission from state governments concerned.

Such a stipulation will also be considered once a decision is taken to permit FDI in the coffee and rubber sectors and also where permission is sought for enhancement of equity stake, officials point out.

The decision to permit 100 per cent FDI in the tea sector was approved by a group of ministers (GoM) set up for the purpose as well as the Cabinet more than two years ago.

At that time, GoM was informed that possibilities of FDI and technology flows existed in a similar measure in the coffee sector and the automatic route for FDI should be considered for coffee too.

Meanwhile, additional commerce secretary in charge of plantations and anti-dumping duties L V Saptharishi told FE that the government policy of promoting natural rubber exports in an aggressive manner had paid off. These exports had risen from a mere 6,000 tonne in 2001-02 to 55,000 tonne in 2002-03 and were in the region of more than 20,000 tonne in the first five months of 2003-04.

Further, rubber growers had also benefited from the rising trend in domestic prices ruling at about Rs 40 to Rs 45 a kg in the past one year from Rs 30 a kg a year ago, Mr Saptharishi said.

On the other hand, domestic prices of tea and coffee had not picked up yet and the government had already set up a price stabilisation fund with a corpus of Rs 500 crore for these two and other plantation items.