Jun 26, 2009

Food Pirates: Indian firms buying farm land in Africa

Indian firms are not only buying land in India, but are also moving across the shores. I call them the 'food pirates' and they are on a land grab spree. If you remember, we had a blog sometimes back about outsourcing food production wherein we had listed some Indian firms who were buying land in Latin America.

The list of the 'food pirates' is expanding. Imagine 80 Indian companies buying farmlands in Ethiopia, and that too with the connivance of the Indian government. One of these companies, the Bangalore-based Karuturi Global Ltd., has already acquired 8,50,000 acres of land in Ethiopia for cultivating food crops, sugarcane, palm oil etc. The company has started to farm in 30,000 acres. The same company has also acquired land in Kenya, and claims to to hold "one of the largest agriculture land banks in the world."

These 'food pirates' also have international support. Although the FAO is unhappy with the way these land acquisitions are taking place, calling them 'neo-colonism', the International Food Policy Research Institute (IFPRI) in Washington DC., as usual is backing these initiatives. It calls for a 'code of coduct' to be followed by these companies, but otherwise does not see anything terribly wrong with such land grabs. I think the time has come to examine the dubious role IFPRI has played all along in destroying food self-sufficiency in the developing world, more so in the African countries.

Dinesh C Sharma of Mail Today has done an excellent report about how Indian firms are trying to gobble cultivable land in Africa. These companies are going to produce food for shipping it back to India taking advantage of the duty-free options that the Least Developed Countries (LDCs) are being provided with under the WTO negotiations. I wonder whether the international community realises that who will produce food for the people living in the African countries where these foreign companies, including Indian business, will grow food not for the people of Africa but for shipping it backhome.

In India had allowed foreign companies to buy agricultural land and grow food for shipping it backhome, I am sure there would have been an uproar. I wonder why the people (and more importantly the political leaders and elite) of the African and Latin American countries are not opposing and driving these companies out from within their national borders. The reason is simple. The rich and elite of every country is the real beneficiary of the process of globalisation. They see nothing wrong in such destructive policies, as long as they get the benefit. They are willing to compromise on even the national security as long as it brings them profits, visible through the ever-rising stock market.

Anyway, here is the Mail Today report:

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

By Dinesh C Sharma
Mail Today, June 25, 2009

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.”

17 comments:

Dr. Ernest Albert said...

I am least surprised...if swathes of land on Moon are up for grab/sale.If foreign banks are swollen with indian money(sic) so what's the big deal.Our Lakshmi Mata went global long ago you see.A little story why Ma Lakshmi.Bania community,centuries ago chose a poor Bania to invite Ma Lakshmi to his poor home and she did.He offered her a seat and said 'MA you wait...I go take Bath,become pure then offer food and mithai..please wait Ma ...dont go",Ma Lakshmi promised to wait there for him.
Obviously he never returned and Ma lakshmi is ever trapped in the homes of Banias.
The symbolism,the modern matrix is very apt in this story I picked from thr book by Raghunandan Jha.
Now our Banias(broader contours) will take her to the Black Continent where she will prosper them while gathering some sun-tan.We take our Mata's everywhere.

James said...

Hi Devinder,
Indian investment in agriculture in developing countries is a better option by far than Daewoo or any western country. Some of these deals are going to be tempered with built-in safeguards for the citizens of the countries in question. By and large it's not going to be corporate farming at all, but many relatively small Indian agriculturalists with the investment company acting as a cooperative. Some of these countries desperately need food security solutions and I think India can provide it in a fair way.

P James

Anonymous said...

VERY WEALTHY SAUDI OIL TYCOON SHEIKH MOHAMMED ALAMOUDI TRIED TO FORM PARTNERHIP WITH ETHIOPIANS IN AGRICULTURE DEVELOPMENT PROJECTS AND CHOSE ATO. MESHESHA BETREMARIAM TO BE THE CHAIRMAN OF AL-MESH ,IN 1995 ATO MESHESHA BETREMARIAM TOOK ALL THE OPERATING CAPITAL AND PUT IT IN SWISS BANK ACCOUNT AND TOLD ALAMOUDI THE FARM WENT BANKRUPT. ATO MESHESHA’S ACTION LED SHEIKH MOHAMMED ALAMOUDI AND OTHER FOREIGN INVESTORS TO LOOSE FAITH WHEN IT COMES TO CO-OPERATING AND GIVING RESPONSIBILITIES TO MANAGERS OF WEALTH TO ETHIOPIAN EX-LANDLORDS LIKE MESHESHA.THE ONLY CHOICE LEFT NOW IS SELLING LANDS DIRECTLY TO FOREIGNERS.GREED BROUGHT THE SELLING OUT OF LANDS ON ETHIOPIANS.FOR EVERY ACTION THERE IS A REACTION!!

Anonymous said...

i surprised to know indian companies aquired so huge land in other countries in india also so many lands which is not useful our sea,s bank is not utilised so many nice palces is not developed and a heavey rain in india but storeges is not done properly even in every city and willages dams and ponds are not so deep so we unable to storege water in india we need to make deepest pond, and dame and needs to utilise agriculture activity we have to given tax releif for making well, small checkdam and dams to companies who makes social activites with hard scrutinising but unfortunetly our land rules are so wick that some superwealther hemant hemant

Anonymous said...

India has to go out because they have dumb landowner laws. a 10acre farm ( I think that is the limit, but could be off a bit) will never get any investment to produce effectively. they should allow some big agribusiness farming in india

Anonymous said...

Hello,i have 30acres of land for farming here in africa.You can come ahead to check it out if its okay by you.I have a proposal on it and you can send me a mail to check it out.I do not need payment before inspection,just come down to check it out yourself if its suitable for your use.To reach me back,send a mail to dapeper@yahoo.com.

daniel john said...

The list of the ‘food pirates’ is expanding. Imagine 80 Indian companies buying farmlands in Ethiopia, and that too with the connivance of the Indian government.
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According to Telegraph online, Indian government has given soft loans to support the overseas ventures of the companies, which has been described as a challenge to China and Saudi Arabia in the new scramble for Africa.

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Anonymous said...

starvation of local populations, The environmental effects because of "highly intensive farming" — devastated soils, dry aquifer, and ruined ecology from chemical infestation are known as "Externalities" which ECONOMISTS and BUSINESSES tend to avoid as they have no explanation for their greed and corrupt practices..