Govt allows 100% FDI in five plantation crops

Lower import bill, tech infusion likely

The Centre on Tuesday allowed 100 per cent foreign direct investment (FDI) in five plantation crops - coffee, rubber, cardamom, palm oil tree and olive oil tree - via the automatic route.

It also simplified certain conditions in the FDI norms for agriculture and allied sectors.

At present, 100 per cent FDI is allowed only in tea plantations through the government approval route.

Expanding FDI to the entire sector would ensure that major companies in palm oil, rubber, etc, can pump in capital to either purchase or partner with domestic players. It might even help in lowering India's annual edible oil import bill, as big foreign players in the sector, mostly in Indonesia and Malaysia, could also bring in modern technologies, along with the funds.

D K Joshi, chief economist of CRISIL, told Business Standard, "Opening up FDI in plantation sector might also bring in new technologies and not just more funds."

Palm, the highest-yielding perennial edible oil crop, needs a fraction of the area used to grow other oilseeds. This makes it attractive in a country such as India, where land is scarce. But a gestation period of up to five years and laws limiting the size of each palm development have hindered efforts to switch to the crop, putting off local farmers and companies such as Ruchi Soya, Cargill and Bunge

In agriculture and animal husbandry, FDI is barred in crops, but allowed in dairy and food processing sectors. "In line with this sector, the government has decided to open certain other plantation activity, namely, coffee, rubber, cardamom, palm oil tree and olive oil tree plantations, also for 100 per cent foreign investment," the commerce ministry said.

Welcoming the decision, Mumbai-based Solvent Extractors Association Executive Director B V Mehta said, "Allowing FDI in palm oil tree is a welcome step and will boost domestic production." He, however, said the benefit would be more if the government declared palm oil tree as a plantation crop and exempted it from the land ceiling Act.

The country produces around 300,000 tonnes of coffee annually, about 900,000 tonnes of rubber and about 17,000 tonnes of cardamom.

All India Rubber Industries Association President Mohinder Gupta said, "India has been facing a deficit in natural rubber for many years now. The gap between production and consumption of natural rubber is widening. Foreign direct investment will bring new practices and technology."

Automotive Tyre Manufacturers Association Director General Rajiv Budhraja said rubber plantation sector needed fund infusion and technology. The area under plantation has to be widened and productivity enhanced. The move would rekindle interest in the rubber sector, he added.