Govt weighs FDI in rubber and coffee plantation in order to attract more FDI

New Delhi: The government is considering allowing foreign direct investment (FDI) in rubber and coffee plantation sectors with an aim to attract more FDI into the country.

A proposal to this effect is under consultation of the Commerce and Industry Ministry, sources said.

Currently, 100 per cent foreign investment is permitted through the government approval route in the tea plantation sector. However, FDI is not allowed in any other plantation sector or activity.

According to sources, foreign players could be allowed to engage in rubber and coffee plantation, engage labourers in plucking of coffee beans or collecting latex from rubber trees and processing of the raw material.

Permitting foreign investment will also help India reduce import bill of rubber and boost India’s coffee exports, they said.

India’s natural rubber import increased to 442,130 tonnes in 2014-15, the highest so far, from 3,60,263 tonnes in 2013-14 and 2,62,753 tonnes in 2012-13.

The production of natural rubber declined to 12-year low at 6,45,000 tonnes in 2014-15 as against 774,000 tonnes in 2013-14, down 12%.

To boost domestic production of the crop, the government is in the process of formulating a national rubber policy.

Total rubber consumption by various industries, including tyre manufacturers, stood at 10,18,000 tonnes in 2014-15, 3.7% higher than the previous year.

As per estimates, the country s coffee output is pegged at 3,31,000 tonne for 2014-15 crop year (October-September), against 3,04,500 tonne last year.

India exported coffee worth $803 million in 2014-15 against $799 million in 2013-14.

Allowing foreign play in these two plantation sectors is part of the several steps from the Commerce and Industry Ministry to boost foreign investments.

In 2014-15, FDI into the country rose 27% to $30.93 billion.

To pull in foreign investments, the government has raised the FDI cap in the insurance sector and defence. It has relaxed policy in railways, construction and medical devices sectors.

Foreign investments are considered crucial for India, which needs around $1 trillion in the next five years to overhaul its infrastructure such as ports, airports and highways to ramp up growth.

Growth in foreign investments helps improve the country’s balance of payments (BoP) and strengthen the rupee.