India cultivates Africa

Mail Today | 25 June 2008

By Dinesh C. Sharma in New Delhi

Firms buy up African farms to raise crops that will be ‘sold’ to India India

IN A NEW wave of outsourcing, Indian firms are acquiring swathes of farmland in poor African countries to produce food meant to be exported to India.

But food policy experts are lambasting the strategy as “ neo- colonialist”. They say such deals exploit the natural resources of poor countries who are themselves facing acute food shortages.

Indian firms have signed land deals in Ethiopia, Kenya and Madagascar to produce a range of food crops, including rice, sugarcane, maize, pulses, oilseeds, tea and even vegetables. Some are also investing abroad to grow the biofuel crop jatropha.

More than half of Indian FDI of $ 4.15 billion (Rs 20,000 crore) in Ethiopia at the end of 2008 was in agricultural and floricultural sectors, with investments coming from about 80 companies.

The government is providing cheaper credit lines to Ethiopian entities to produce agricultural products for export to India. It is also backing these investments through schemes like ‘Duty Free Tariff Preference Scheme’, under which Ethiopian agri-products can enter India on lower tariffs.

This indicates the motive behind Indian investments in Ethiopia is to boost agricultural products meant for export to India.

India’s small and fragmented land holdings are unsuitable for large-scale commercial farming.

Water is also in short supply. So these firms are rushing to Africa, where they can acquire large contiguous tracts of cultivable land.

Most of the Indian companies involved in this new wave of outsourcing are entrepreneurial firms engaged in agro-products and floriculture that are now diversifying into agriculture production.

The government seems to be promoting the acquisition of farmland in foreign countries as an alternative to purchasing food from international markets.

Besides limited availability of water and arable land, bottlenecks in storage and distribution and expansion of biofuel production are creating uncertainties and constraints in food production.

But the Food and Agriculture Organisation ( FAO) has dubbed such deals as “land grabbing”. “It is unfortunate that the Indian government is supporting such acts,” said Devinder Sharma of the Forum for Biotechnology and Food Security. “Such deals are bound to result in civil strife in host countries in coming days.” One of the largest land acquisition deals in Ethiopia has been signed by the Bangalore-based Karuturi Global Limited. The company’s Gambella Agriculture Project was launched by Ethiopian agriculture minister Dr Abera Deresa and Indian ambassador Gurjit Singh jointly in the first week of June.

The company says it has signed an agreement with the Ethiopian government for acquiring 8,50,000 acres of land for cultivation of food grains, sugarcane, palm oil and other crops. Already 30,000 acres of land has been brought under cultivation. And it has acquired land in Kenya too. With these two deals, the company claims to hold “one of the largest agriculture land banks in the world”. An agribusiness company named Varun Agriculture SARL has signed a contract farming agreement with 13 local landowners’ associations in the Sofia region of Madagascar. The deals, signed on January 26, cover a land area of 1,70,914 hectares.

“We are encouraging more Indian companies to come into mainstream agriculture so they can contribute to local demand and food security,” Indian ambassador Gurjit Singh noted while addressing an Ethiopian parliamentary panel earlier this month.

The government is investing directly as well. A loan of $ 640 million (Rs 3,000 crore) has been provided to Ethiopia to boost sugar production for exports over five years. The soft loans, with an annual interest rate of 1.75 per cent, are to be repaid over 20 years. India had never before offered credit of this magnitude to any single country.

Food-importing countries with land and water constraints but rich in capital, such as the Gulf states, are at the forefront of new investments in farmland abroad, pointed out a recent report from the Washington-based International Food Policy Research Institute.

In addition, countries with large populations and food security concerns such as India and China are seeking opportunities to produce food overseas. These investments are targeted at developing countries where production costs are much lower and land and water more abundant.

Most land deals are taking place in Ethiopia, Ghana, Mali, Madagascar, Mozambique, Sudan and Tanzania.

The FAO report also pointed out that rising agricultural commodity prices make acquisition of land an attractive option. Agribusiness companies, traditionally involved in food processing and distribution, are entering direct production.

Although political risk remains high in many African countries, policy reforms have improved their attractiveness.

These deals have long-term implications for global agriculture.

They may impact the balance between small-scale and largescale farming and the future livelihoods of small-scale farmers. The relative importance of export-led agriculture is bound to grow, and so will the role of agribusinesses in agricultural production, processing and distribution of food.

There are ethical and environmental concerns as well. “Outsourcing food production will ensure food security for investing countries but would leave behind a trail of hunger, starvation and food scarcities for local populations,” Sharma said. “The environmental tab of highly intensive farming — devastated soils, dry aquifer, and ruined ecology from chemical infestation — will be left for the host country to pick up.”
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