Indian, U.S. Technology Investors Back $58 Million Australian Edible Oil Venture

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Researched by Industrial Info Resources (Sugar Land, Texas)--Australia's Riverina Oils & Bio Energy Pty Limited (ROBE) (Melbourne, Victoria) has begun the development of a $58 million oilseed crushing and edible oil refining plant in Riverina at Wagga Wagga in New South Wales. The project has the financial backing of a consortium of investors from India and the United States. The agribusiness venture plans to become a large-scale oilseed processor and exporter, and a biofuel producer in the future.

D.D. Saxena, managing director of ROBE, believes that the success of the project will encourage additional investment from India. The upcoming plant will crush and refine canola, cottonseed, safflower, soybean and sunflower seeds. The initial production capacity of the plant will be 170,000 tons per year and production is expected to begin by October 2010. ROBE's future plans include the production of 75 million liters per year of biodiesesl, either from imported palm oil or from refined oil.

The investors include Bhoruka Group (Bangalore, Karnataka) owned by SN Agarwal, who is chairman of both ROBE and the Transport Corporation of India Limited (TCIL) (Bangalore, Karnataka), the largest trucking company of India; Ravi Uppal, head of the Power Division of Larsen & Toubro Limited (BSE:500510) (L&T) (Mumbai); and technology investor Lotus Ventures (California), which is involved with several technical startup companies and the bioenergy sector. The investments, when completed, will comprise the largest greenfield Indian investment in eastern Australia. The Bhoruka Group also has expressed interest in exploring the possibilities of deriving power from biomass, which will include residue from local citrus orchards, vineyards, or sugarcane from Queensland.

Of the 65,000 tons per year of refined edible vegetable oil that will be produced, ROBE intends to export some to Japan, India, other Asian nations, the U.S. and Europe. The 105,000 tons per year of vegetable protein meal produced will be used in Australia's animal, dairy and poultry feed industry. At full capacity, the venture is expected to generate revenues of about $139 million, with exports contributing about $93 million in the first five years.

Saxena realized that exporting raw oilseeds to Asia was not as profitable as exporting refined oils and, hence, he hopes to bring in a change in the Australian company's business practice with the new venture. For example, India imposes a 35% duty on imported oil seeds while imported oil is duty-free. The cost of transporting oil, which is lighter than oilseeds, is also lower, and that will add to the profits of the company. India is an important customer of edible oil, as it is the world's largest importer of edible oil.

Contracts are being negotiated with farmers for the supply of crops. According to Saxena, about $56 million worth of crops will be purchased annually from Australian farmers. He said that farmers in Riverina probably will cultivate an additional 75,000 hectares of crops to be able to supply the required 100,000 tons per year of oilseeds. About 50 hectares of crops will be cultivated in other parts of Australia.

State Bank of India (BSE:500112) (SBI) (Mumbai) is providing financial assistance to the project.

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