NEW DELHI (Reuters) - India will allow foreign companies to directly invest in palm oil plantations, the government said on Tuesday, as Prime Minister Narendra Modi aims to cut imports of cheap vegetable oils and make the country self-sufficient this decade.
Vegetable oils are India’s third-highest overseas spend after oil and gold, prompting the government to explore investing $1.5 billion in the next three years to help farmers grow oil palm trees in an area the size of New Jersey, sources have said.
The government said foreign investors can own palm oil as well as coffee, rubber, olive oil tree and cardamom plantations without seeking regulatory permission.
The move may benefit top palm oil planters in countries such as Indonesia and Malaysia, as well as helping India to cut a vegetable oil import bill of more than $10 billion.
“We welcome the decision and thank the government for conceding our demand,” said Sandeep Bajoria, chief executive of the Sunvin group, a leading vegetable oil importer. “We see a number of Indonesian and Malaysian palm oil companies tying up with their Indian counterparts to grow oil palm here.”
Palm, the highest-yielding perennial edible oil crop, needs a fraction of the area used to grow other oilseeds, attractive in a country such as India, where land is increasingly scarce as the population rises.
But a gestation period of up to five years and laws limiting the size of each palm development have hindered previous efforts to switch to the crop, putting off local farmers as well as companies such as Ruchi Soya, Cargill and Bunge.
Bajoria said the government should look at recognising oil palm as a cultivation crop so that local firms can acquire land to grow it, referring to a rule that prohibits corporations from commercial cultivation of oil palm.
Reporting by Sankalp Phartiyal and Mayank Bhardwaj, editing by Louise Heavens