Latest farm reforms may light up Cargill’s expansion plans in India

A farmer harvesting wheat crop in Ghaziabad district of Uttar Pradesh (India) during coronavirus lockdown in April. (Photo: PTI). Sketched by the Pan Pacific Agency.

NEW DELHI, Oct 7, 2020, Business Standard. The recent farm legislation have rung a bell for us and now we are looking at what more to do in the sector, says Cargill India President Simon George, Business Standard reported.

Specific investment plans are yet to crystallise, but Cargill believes that the legislation will act as a catalyst to attract private sector investment for building supply chains to take Indian farm produce to national and global markets.

The new legislation that have caused a stir in the country allow farmers to sell outside the APMC market yards and are aimed at ensuring better prices. For companies like Cargill, the legal framework brings stability, creating an environment for infrastructure investment.

Cargill, which has been around in India since 1987, buys 13 commodities in the country, mostly for internal trade and its consumer brands. The company markets six consumer brands of edible oils – NatureFresh, Sweekar, Leonardo olive oil, Rath and Sunflower brand of hydrogenated fats – and wheat flour under the NatureFresh brand.

Participation in international trade including exports has been as and when opportunities arise even though Cargill operates in about 70 countries. George explained that the taxes charged through the Agricultural Produce Market Committee (APMC) was one of the reasons making agri products uncompetitive in the global market. The legislation will bring new opportunities for the farmer and the capability of taking a farmer to the global supply chain will open up now, he said.

Various taxes/fees/commission are levied on trade through the APMCs, which according to the private sector companies is opaque. Moreover, the global supply chain is based on a consistent movement of goods.

“Earlier, the uncertainty of Essential commodity bill restricted the private companies from investing in the storage capacities as the stock limit conditions imposed through the law were hindering investment in the agriculture infrastructure,” pointed out George.

Allowing private companies to invest in storage capacities will ensure that there is price stability in the produce making the country globally competitive and help farmers connect to global supply chains, he added.

Inadequate storage capabilities in the country lead to wastage of perishables each year. “In a season where production is huge, the farmer has to resort to distress sale, and in a lean season, prices go up, because there is insufficient storage capability. Infrastructure will bring stability to the market,” said George.

Cargill India is present in major grain and oilseeds producing and consuming states in India and operates through regional merchandising and origination offices besides multiple third-party storage locations. It has a storage facility in Davangere, Karnataka where it has invested $13 million to provide more shelf life to produce; Cargill also has 12 manufacturing plants in India, the majority of which are in agro-food.

George drew a parallel between the agricultural reforms and the economic reforms of 1991. “It is something similar to the 1991 reforms when people were scared about what might happen to the country and whether it will be taken over by privatization and globalization. But it has actually pulled 250 million people out of poverty. The farm bills are a significant first step in opening up agriculture,” he said.

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