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Escorts Plans Rs 1,000 Crore Agri-Trading Thrust

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BUSINESS STANDARD
Last Updated : Jan 28 2013 | 12:40 AM IST

The Rajan Nanda-controlled Escorts is in talks with two overseas companies to foray into the business of foodgrain storage and "its scientific trading" with an investment outlay of Rs 1,000 crore.

"We are in talks with a Canadian and an Australian firm," Escorts chairman Rajan Nanda said. The company may also be in talks with multinational grain trading firm, Cargill, for a possible joint venture, sources said.

Nanda said the foreign partner would have a minority stake in the joint venture. Escorts will set up a new downstream subsidiary for the venture, which will have an equity base of Rs 250 crore. Rough estimates show, total investments required for rolling out the project will be between Rs 850 crore and Rs 1,000 crore, Nanda added.

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The Escorts chief said bids (expression of interest) for foodgrain storage, recently proposed by the Food Corporation of India (FCI) under the aegis of the Union Agriculture Ministry, will be submitted within the next two months.

The FCI recently invited private industrial houses to submit expressions of interest in the grain storage and trading business. The government wants the industry to put up silos for warehousing grains up to 1.8 million tonne in specified markets that the corporation will indicate in advance, where grain is primarily produced. Concurrently, the industry will set up silos in the consuming states which will import the grain.

The government will give the industry wastage allowances. It will also specify the amount the private firm will pay for handling, storage and transporting of the grain end-to-end.

But, since Escorts does not have the required knowledge and experience in this kind of a business -- handling 1.8 million tonne of foodgrain -- Nanda has decided to look for a foreign partner. "We want to tie-up with a company like Cargill which will bring in the skills required for foodgrain trading. Cargill has a major interest in foodgrain trading," he said.

"If anyone wants to buy foodgrain from India, he/she will buy only from companies which have got silos, grading and warehousing capabilities," he added.

Escorts is one of the largest manufacturers of tractors. "We think backward integration is going to involve the farmers. Forward integration is going towards the consumer. Our interest in Escorts is one towards the farmers. We do not have the requisite infrastructure for forward integration. We will seek to derive that from our foreign partner," Nanda said.

In the past years, India has produced surplus wheat and rice. However, the quality of grain available to the end user in the exports market is below international standards. Different varieties of grain are required for producing noodles or biscuits and India, with its surplus produce and agro-climatic zones, can adopt different crop cycles, to become a major source of grain to the world.

Scientific trading will help farmers get the right seed, grow the right crop, get the best buyer, or the best contract and the right price. It will also do away with the large numbers of middlemen involved in the business.

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First Published: Mar 12 2002 | 12:00 AM IST

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