Wednesday, May 29, 2013

The Indian-Israeli olive agribusiness experiment

The Indian-Israeli olive agribusiness experiment

Though olives are hardly a staple in India, through Israeli expertise and saplings, Rajasthan farmers are expecting a bumper crop this year


BANGALORE — In a sign of growing relations between the two countries, Israel has extended                         an olive branch to India.

Quite literally, in this case.

Over the last five years, Indian farmers have joined hands with Israeli agribusiness to produce a crop that the majority on the subcontinent have only seen in books and films: fresh, green olives.

The project started out as a joint venture between Israeli firm Indolive and the agricultural board representing the Indian state of Rajasthan, a desert state on the western border. An Indian private company, Finolex Plasson Industries Ltd, joined the business alliance in 2007 through its subsidiary Plastro Plasson, drumming up greater investment for the enterprise. All parties involved in the joint venture now fall under an umbrella group called the Rajasthan Olive Cultivation Ltd (ROCL).

“We really got on to the project by chance after we happened to hear that there was already something happening between State of Rajasthan and an entrepreneur in Israel,” says Satish Ghatpande, executive director at Plastro Plasson Ltd.

The idea of including a private sector company in the deal particularly appealed to the Israeli investor, given the complexities of engaging with Indian bureaucracy.

Since Plastro Plasson was already in the drip irrigation business, they were a natural fit for the project.

Ghatpande says the scale of investment in India is relatively large, even though olives are hardly a staple crop in India.

“The current investment includes the state government and us putting in Rs. 15 million [about $270,000] each towards share capital,” he says, adding that Indolive imports the saplings to India.

The pilot project has now blossomed into a system of organized olive cultivation in six regions in Rajasthan. (photo credit: courtesy)

While the venture began as a pilot experiment, it has now developed into a system of organized cultivation across six regions in Rajasthan. Ghatpande forecasts a 200-hectare yield from the current harvest.

“Our results have been mixed since the nature of soil differs from place to place,” he explains. “So, we try different saplings based on soil conditions.”

It hasn’t been smooth sailing for the venture either. From water shortages in the arid western desert and input resource bottlenecks to the paucity of skilled labor, the project has repeatedly hit stumbling blocks.

“The difficulties are there. We have to train people, create the right infrastructure and many times, the olive crop is very difficult to monitor as well,” Ghatpande says.

Also, despite initial investment, projects such as these are often sidelined by the government as they do not represent mainstream economic activity, he adds.

The total share of agriculture in India’s gross domestic product is 21 percent — a worrying statistic when you consider 72 percent of the total population lives in rural agrarian communities

This ties up with the overall state of agriculture in India, where the government sees more bang for their buck in the manufacturing and services sectors, which deliver swifter and larger returns. According to World Bank data, the total share of agriculture in India’s gross domestic product is 21 percent — a worrying statistic when you consider 72 percent of the total population lives in rural agrarian communities.

However, Ghatpande says farmers in Rajasthan are still keen to get in on olive cultivation despite the crop’s limited exposure to the Indian markets.

“Farmers are now willing to jump from their current crops to olives because the yields on many crops in Rajasthan are declining,” says Ghatpande. Given that most of the olive crop is for exporting, farmers see this venture as lucrative in the long term.

The government, however, sees value in keeping some proportion of the fruit and pressing it locally within India.

“In August, we’re expecting the oil pressing machinery to come from Italy,” says Yogesh Verma, manager of ROCL. This means we can now press the oil in India.”

And while the import of olive oil has increased to eleven thousand metric tons over the last five years, Verma says this number could fall once olives are pressed locally. He also forecasts harvests will soon hit 5000-hectare yields in the next three or four years.

Early signs of what is expected to be a 200-hectare harvest next year. (photo credit: courtesy)

So are farmers currently locked into contract-farming agreements with ROCL — a system that could potentially cap profits on farmers’ harvests?

“Apart from the 182 acres of land under us, there is a separate 72 acres for local farmers,” Verma says. “Also, a new agreement that we’re discussing will allow farmers to sell their fruits to anyone they want.”

The olive experiment, if anything, points to a larger development in business ties between India and Israel. The latter see India, an emerging economic powerhouse, as a great global market for technology transfers and trade.

“The potential of cooperation and synergy between Israeli and Indian companies has become more and more clear with the increasing number of Israeli companies that want to come here,” says Orna Sagiv, the Israeli consul general in Mumbai, India.

The growth in technology exports from Israel to India explains why the Israeli embassy was keen to set up shop in Bangalore, a southern Indian city known for its high-profile IT companies. The consulate in Bangalore, which was formally inaugurated on May 20, is the third one in India.

Only three other countries in the world have over three Israeli missions, Ambassador Alon Ushpiz mentioned at the inauguration ceremony. He added that it is the growth in small and medium businesses in both countries that drives successful entrepreneurship and innovation.

In terms of hard numbers, Sagiv says that trade has risen exponentially over the last two decades.

“Trade has increased since the establishment of diplomatic relations in 1992 between India and Israel,” she says. “If you look at the scale, the volume of trade was very low — at $180 million. Today we have reached over $5 billion in trade.”

This trend, Sagiv adds, will continue with the increasing bilateral trade relations and exposure that business people from both countries get.

Agribusiness is just part of the $5 billion trade between India and Israel. (photo credit: courtesy)

So what is it about India that has drawn this growing trend of investment in business?

“On one level, it is that both sides benefit,” Sagiv says, explaining that the market potential in India is huge. Entrepreneurs in Israel see joint ventures as the best way to tap this potential, because having partners on the ground would limit their exposure to unsound investments.

The biggest support from Israeli technology, Sagiv identifies, is in terms of food and water security, especially in agribusiness. Traditionally, Indian agriculture is rain dependent and with erratic monsoons, droughts are common. This explains the popularity of Israeli drip irrigation technology among farmers in India, where irrigation infrastructure has yet to catch up.

Recently, an Indian news magazine reported that farmers from the fertile Haryana region in the north-west were visiting Israel for “specialized training” in farm technology.

The consul-general, who is leaving India after five years of service at this post, also says that India and Israel are currently negotiating a free trade agreement, which she calls a potential “game changer.”

‘Israel is a small country but has advanced agro-technology that can benefit India’s population’

“We have had a few rounds of talks already and hopefully, we are moving in the right direction,” Sagiv says.

While she declines to comment on India’s recent streak of protectionist trade policy, as seen in the rigid caps it placed on the entry of foreign big-brand retail, Sagiv is optimistic about this incipient trade deal between Israel and India.

“We don’t have Walmarts and Targets,” she says. “Israel is a small country but has advanced agro-technology that can benefit India’s population. We believe that trade between the two countries will triple in the next few years. ”

As these economic ties grow, it isn’t impossible to envision the sacred Mount of Olives lending its name to a stretch of leafy grove among the dunes in the Indian desert.

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