India’s ambitious plans to buy agricultural land in Latin American countries to build oilseed plantations has reached a deadlock with the consortium of around 20 leading oilseed processing firms failing to get a firm commitment from banks for a term loan.
Few years back, around 20 Indian oilseed processing firms including some big names like KS Oils and Ruchi Soya formed a consortium to purchase land in Paraguay and Uruguay, to grow soyabean, so that the processed soyaoil could be sent back to India. The apex body of edible oil processors and importers, the Solvent Extractors Association of India (SEAI) has been entrusted to negotiate with banks initially.
The idea about trying oilseeds cultivation in those countries struck the industry after SEA took a delegation to those countries two years ago. With farm lands fast shrinking and oilseeds production almost stagnating at 24 million to 26 million tonne, the project was found to be right answer for bringing down the rising edible oil import bill.
However, lack of firm commitment from banks to grant a term loan of Rs 200 to Rs 250 crore to the processors has put the project in a limbo.
?There has been no forward movement from the finance ministry either, though we are pressing for allowing EXIM bank to grant us the term loan, but the delay is making members loose interest in the project all together,? said B.V. Mehta, executive director of SEA.
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. ?We want banks to finance 70% of the working capital needs for the project, while the remaining 30% will be brought by us,? Mehta said.
He said the association did try and approach some private banks for financing the project, but they didn?t seem to able to manage a project of such nature. The delay could cost the members dearly as the cost of land in Paraguay and Uruguay has been steadily rising because of strong demand from Brazilian and Chinese buyers. ?Last year, we felt was the best time to buy agricultural land in these countries as because of global economic recession, prices had dropped considerably, but now they are almost $1,000 per hectare more than last year?s level of $3,000 to $3,500 per hectares,? Mehta said.
State-owned, State Trading Corporation of India (STC) has been granted the first right of refusal for the edible oil produced from these proposed plantations. ?If STC refuses to bring the oil to India, then only we will sell the produce in open market,? Mehta said.