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The export of farm produce has caught the fancy of leading industrialists like Sunil Bharti Mittal, the Munjals, Gautam Thapar and the Ruias.
They are betting that after software, IT-enabled services and generic drugs, western countries will soon start sourcing farm produce from low-cost suppliers like India.
At the moment, there are no precise estimates of how big the global opportunity is. But these businessmen are convinced it is pretty big. Both Mittal and Thapar told Business Standard that the farm business, in the long run, had the potential to become bigger than their core businesses, telecom and paper, respectively.
Thapar's closely held farm business venture, Global Green, has emerged as one of the top 10 gherkin suppliers in the world in the last three years.
His company has become the fourth largest buyer of glass containers, used for packaging gherkins, in the country after the UB Group, Coca-Cola and Pepsi.
Mittal has set up FieldFresh Foods Pvt Ltd a 50:50 joint venture with the Rothschilds to invest $50 million in global distribution of fresh fruit and vegetables.
The Munjals, too, are learnt to be adding final touches to the blueprint of their farm business venture. "The details will be worked out in the next 4-6 weeks," Sunil Kant Munjal said.
Of course, all of them will have to rely on contract farming as existing rules forbid companies from owning agricultural land.
PepsiCo India, a pioneer in the filed of agricultural exports from the country, has a network of 2,000 farmers in Punjab and West Bengal. Global Green has a network of 10,000 contract farmers in Karnataka and Andhra Pradesh.
The main attraction of exports is easy scalability. One, by getting into tie-ups with large retail chains overseas, the scale of operations can be increased exponentially.
Two, once large buyers have been tied up, more products can be mounted on the same channel. And three, since crop yields in India are still low, the same universe of contract farmers can be used to produce more.
Global Green, for instance, has grown farm goods worth Rs 125 crore (Rs 1.25 billion) in three years and is projected to grow by at least 30-40 per cent per annum in the years to come.
"Several global companies are talking to us to source other items also like organic food and fruits. There are other global firms that would like to outsource output running into millions of jars to us. If that happens, the numbers will become awesome," Global Green Managing Director Vineet Handa said.
Mittal's business model is slightly different. "There are numerous challenges since the model we are looking at is not processing food and vegetables but essentially providing fresh fruit and vegtables to consumers, " he says.
"To achieve this objective, you have to reach a cold chain or a storage within four hours of plucking. We are in the process of learning. For instance, we tried to export grapes from Sangli in Maharashtra to Holland but pest control and shipping the product were the key problem areas," Mittal says.
In Punjab, the main problem is how do we ship the product from a state, which is without a port. Where is the cold chain to ensure transportation in such cases?" he said.
There might be teething problems, but everybody acknowledges that India has several advantages when it comes to cultivating farm goods. Abundant sunlight throughout the year helps farmers grow at least two crops a year.
In the West, farmers get only one season to produce. Production costs are known to be at least 15 per cent lower than that in the West. No wonder, PepsiCo's cumulative farm exports from India over the last 10 years have crossed Rs 2,320 crore (Rs 23.20 billion).
Also, the growing cost of road transport, especially in the US, is working to the advantage of Indian exporters.
"The cost of sending one container from India to either the east coast or the west coast of the US is about $2,100. But if you were to transport the same container by road from New York to Los Angeles, it will cost you $3,200," said an industry expert.
