Should Indian firms undertake farming abroad?

The Commerce Minister may be treading on slippery ground. He reportedly told the diplomats of Latin American countries recently that Indian companies can form joint venture projects for cultivation of lentils, oilseeds and foodgrains which are crucial import items (for India).

Whether the minister made the statement for sake of dramatic effect while dealing with overseas diplomats or whether he has forgotten recent history is unclear. But the minister’s statement is unlikely to be taken seriously by India’s trading partners like Argentina and Brazil.

Indeed, the idea of cultivating pulses in foreign countries for import into and consumption in India is utterly misplaced at this point in time. Following a massive rebound in domestic pulses production in the last two years, resulting in steep fall in domestic prices, the government has imposed stringent restrictions on pulses import from around the world.

Quantitative restrictions (QR) on import of tur/arhar (pigeonpea), urad (black matpe) and moong (green gram) are in place since August 2017. On chickpea and lentils import there is a stiff rate of customs duty. On yellow pea, there is QR plus duty. The government is doing everything possible to keep imports highly restricted despite the fact that many countries have complained against India’s restrictive import policy at the World Trade Organization.

If Indian companies invested abroad and cultivated pulses, would the Indian government freely allow import of such pulses? The minister must be clear about this aspect before exhorting entrepreneurs to invest abroad.

Those engaged in pulses trade have not forgotten the Prime Minister’s assurance made in 2015 to many African countries to produce more pulses for the Indian market. That was the time when India faced a serious shortage of pulses following El Nino driven dry conditions. Domestic prices had skyrocketed much to the discomfort of the government.

A panic stricken New Delhi left no stone unturned to contain the damage arising out of the unprecedented price rise. Two years later, the same government went back on its promise to overseas growers — especially small growers in African countries — and imposed controls on import. This not only shocked growers in Africa but also inflicted enormous financial loss ( BusinessLine February 14, 2018).

The Indian government, as a result, has lost credibility and trust of overseas growers who bitterly complain that even the Indian Prime Minister’s categorical assurance has no sanctity or value. Pulse growers in Myanmar too are facing the same fate. It is a mystery why the Commerce Minister forgot the recent history.

If anything, it is a ridiculous idea for Indian companies to go abroad and cultivate pulses, oilseeds and other grains for the Indian market. Some entrepreneurs in the oilseeds and vegetable oil sector explored oilseed cultivation in Argentina a few years ago, but gave up the pursuit in the absence of financial viability and operational hardships.

What prevents the government from strengthening the country’s own production base? As for agriculture, India has everything going in its favour — land, sunshine, water availability and varied agro-climatic conditions. What we lack is a long-term growth-oriented policy with focus on research and investment.

The structural issues of Indian agriculture in general, and oilseeds and pulses cultivation in particular, have remained unaddressed for long years. Successive governments have paid lip service to agriculture but often adopted the facile option of import at the cost of domestic growers.

In the last two years, farmers across the country have been facing acute distress and taking to the streets. But this time around the easy option of loan waivers and handouts is being pursued. An utterly thoughtless idea of ‘doubling farmers’ incomes’ has been mooted without any homework or research. The government is really struggling to live up to the grandiose promise.

Instead of asking Indian companies to invest abroad for the Indian market, it would be desirable for the Commerce Minister to exhort Indian companies to invest within the country in order to raise productivity, production and quality. He can ask corporate houses to work closely with farmer producer companies.

More importantly, the minister can leverage our bilateral agreement with neighbouring countries to promote export of pulses which will bring relief to the beleaguered growers here. For instance, Bangladesh imports about 1.5 million tonnes of various pulses from Canada and other countries, and Sri Lanka about half a million tonnes. What has the ministry done so far to step up exports?

The author is a policy commentator and agribusiness specialist.

COMMENT NOW