Contract farming: Godrej Agrovet seeks a big play in oil palm

Now that the government has allowed contract farming, Godrej Agrovet wants a big play in oil palm cultivation.

Speaking in a webinar on agriculture on Thursday, the company’s Managing Director, Balram Singh Yadav, said that the company could “build a very good system for contract farming for oil palm cultivation.” Funds, he added, are not a problem.

In his presentation made earlier, the Secretary had noted that the government had decided to set up a $14-billion Agri Infra Fund, to finance Farmer Producer Organisations, agri-enterpreneurs and start-ups.

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Yadav observed that there are about two million hectares of land in India on which oil palm can be grown; in contrast, only 300,000 hectares are being used now. He said that oil palm gave the biggest bang for the buck compared with other edible oils, yielding four tonnes per hectare, compared with 300-400 kg of others.

Govt support

In response to this, Sanjay Agarwal, Secretary, Ministry of Agriculture and Farmers’ Welfare, assured him full support from the government and said that the government was keen to develop at least 50,000 hectares in the next two years.

It was noted in the webinar that 60 per cent of India’s needs of edible oil are met by imports. In 2018-19, India imported 8.85 million tonnes of crude and refined palm oil.

The ₹7,011-crore Godrej Agrovet — its turnover grew 17.4 per cent in 2019-20 — is already a big player in the palm oil business. Its website notes that it has developed 61,700 hectares of plantations across the country; it has five oil mills, one of which was commissioned recently in Mizoram.

Yadav wanted assurance that stock-holding limits would not be brought back, because “we would like to buy for the whole year.” (The amended Essential Commodities Act still empowers the government to impose stock-holding limits, but only when there is 100 per cent increase in retail prices of horticultural products and 50 per cent retail price rise in non-perishable agricultural food items.)

He also sought more clarity on how disputes would be resolved in agriculture.

Impact of reforms

Expressing confidence that investments would flow into agriculture, Secretary Agarwal said that the government had set up an Empowered Committee of Secretaries, headed by the Cabinet Secretary, to deal with issues that may arise out of the recent reforms in agriculture. Any “changes or support” can be made by the committee — decisions don’t have to go to the Cabinet for clearance, he said.

Earlier this month, the government brought in two ordinances and amended the Essential Commodities Act to give effect to the proposed reforms to agriculture. These reforms are: allowing farmers the freedom to sell their produce in the market and not necessarily to the designated ‘agriculture produce marketing companies’, as was the rule earlier; amending the Essential Commodities Act so as to allow holding of agri stocks; and allowing contract farming.

These reforms, which had been demanded by the industry and economists for long, have been hailed as epochal, paralleled in their potential impact only by the industrial deregulation of 1991.

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