Huge mkt potential, investor-friendly norms lure Indian cos to S America

Some Indian companies are looking at South America as an investment destination because of conducive climate, easy land acquisition, investor friendly economic situation and huge market potential both within the continent and outside. Talking to FE, R Viswanathan, ambassador of India to Argentina, Uruguay and Paraguay, "Indian companies have started looking at the option of South America for food and energy security."

The country's import of edible oil in the year 2007 was 4.7 million tonne, and this is expected to go up to 12 million tonne in 2015, and maybe more, as the requirement will keep going up, said the Indian envoy. Also, last year the import of pulses from the region was around 3 million tonne, and this could go up due to the current drought like situation in India.

"India's capacity to increase production is constrained by diminishing availability of agricultural land, water shortage and monsoon uncertainties. Acquisition of farmland abroad is a logical option, in the same way as our petroleum companies are securing foreign oil fields," said Vishwanathan.

According to the envoy, "Since we cannot increase the land in India, what options do we have: South East Asia, Africa, Central Asia and Latin America, for leasing or acquiring land."

While LatAm is an attractive option, in Africa, there is political sensitivity and it only allows leasing of land. "In South America the agriculture sector is 100% privatised and offers an attractive option to Indian companies to acquire farmland to grow oilseeds, grains, pulses and sugarcane. The Indian companies can also acquire land to grow jatropha for biodiesel and sugarcane for fuel ethanol," he said.

Since in LatAm everything related to agriculture is outsourced, there is no labour problem, they have world glass food storage facilities, and transportation, agricultural technologies and practices are very advanced.

Also, in South America, agronomists have an important role to play, as they are hired by the farm owners and are involved with many issues including producing food, creating healthier food, managing environmental impact of agriculture and usually specialise in such areas as crop rotation, irrigation, explained Vishwanathan.

"Properties in Patagonia, Argentina are available for sale, with organic production of commodities, like olive and wine plantations, etc. for export quality kind. Preservation and conservationism oriented and future valuation of land, water, space," Martin Pablo Leon O'Farrell, a representative from Southern Land Co, Ireland Inc, the company which is leasing and selling land to Indian companies in South America, told FE.

As reported by FE earlier, about 14 producers of vegetable oils, including Gujarat Ambuja (ACL.BO : 89.25 -2.7), KS Oil, Liberty Oil, Pranab Agro and Betul Oil, have formed a consortium to acquire 10,000 hectares of farmland in Uruguay and Paraguay to cultivate soybean, maize and sunflower.

"There are 4 to 5 major Indian companies keen to participate and become either partners or just buy for holdings," Farrell said. "The land is fertile and has enough rainfall round the year. The area has high yield of soybean crop at 3,000 kg per hectare," said an officer of the Solvent Extractors Association of India.

According to the plan drawn up by these companies, they would cultivate three cash crops, mainly soybean, maize and sunflower, as single crop farming will not be economically viable.

To a query about tax benefits on investments, Farrell said, "Because of the Kyoto Protocol and Bali convention, there are some benefits when you work with preservation and conservation. Some governments give back part of your off-shore investments if you are participating or investing in places like these forest areas (cold forest in the Andes, Patagonia region or rain forest in Brazil)."