Foreign equity in coffee & rubber put on hold

NEW DELHI: The commerce department has put on hold liberalisation of FDI in coffee and rubber. After reviewing the FDI policy for the plantation sector, the department has decided to maintain status quo for the time being. Tea is the only segment of the plantation sector where FDI is allowed now.
The review was undertaken following demands from prospective investors and also the scenario emerging for plantation companies after imports were liberalised. However, a number of factors including the impending elections have left the government with no option but to carry on with the existing policy. The ongoing negotiations at WTO is another factor weighing against any modification in policy now, sources in the department said.
The department was also under pressure to take an early decision on allowing foreign equity in plantations other than tea following an investment proposal from the Mauritius-based Inlanks to acquire a 74% stake in south-based Manar Estates Ltd. Since Manar Estates was engaged in growing of both tea and coffee plantations, FIPB wanted the views of the commerce department on the Mauritian company’s proposal.
The government sources said while agriculture is the top priority at the WTO negotiations, the political sensitivity of the plantation sector was quite high. In the recent past, the government had faced strong criticism due to increase in import of plantation produce and fall in the realisation of domestic growers.
Any modification in policy on plantation crops is sensitive for various states like Kerala (rubber, spices, cashew, coconut), Karnataka (coffee) and Tamil Nadu (tea). While FDI liberalisation has generally faced opposition from those owning small holdings, more progressive sections feel inflow of FDI will help in facing imports on a better footing.
It is understood that commodity boards and export promotion councils were consulted on the issue, apart from the ministry of agriculture. While the plantation sector has been subject to immense overseas competition in the recent past, prices of some items like rubber have improved due to hardening of global prices. However, certain items like tobacco and coconut are going through a prolonged period of sluggishness. Increasing import of items like arecanut had also attracted the attention of the government which responded with higher customs duties.