The food pirates

The Hindu Business Line | 6 May 2013
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Foreign investment in African land has been greatly fostered by the Indian Government and its business associations.

by APOORVA PURANIK

Food security has become a major ordeal with the rising international food inflation. Industrialised countries are increasingly meeting their food requirements from outside their own geographical confines leading to a surge in ‘neo-colonialism’.

Mass land acquisitions from African and Latin American countries have been witnessed in the past few years. Land between 37 and 49 million acres in poor countries has either been sold or is under negotiation for foreign purchase since 2006 (according to the International Food Policy Research Institute).

The Indian foothold in agriculture and other investments on African soil began in December 2009 when the Union Ministry of Agriculture introduced farmers’ associations with proposals to lease them land for agricultural development from Egypt, Ethiopia, Sudan, Trinidad and a few other nations.

The objective of this proposal, according to the ministry, was to increase agricultural output in those countries and reduce (India’s) dependence on import of food grains.

‘The Focus Africa’ programme of India initially emphasised on seven major trading partners of the region, namely Ethiopia, Nigeria, South Africa, Mauritius, Kenya, Tanzania and Ghana – countries that account for around 69 per cent of India’s total bilateral trade with sub-Saharan Africa.

Today, 80 Indian companies invest an estimated €1.75bn in buying large plantations in Ethiopia, making it one of Africa’s biggest investors in the agriculture sector.

The biggest firm, Karuturi Global, grows sugarcane, oil palm, rice and vegetables over 350, 000 ha of land.

These large Indian investments are attributed to cheap labour, lax laws, and fertile land . Also, as S. Kumar says in India’s Agrarian Crisis, India’s small and fragmented land holdings that are unsuitable for large-scale commercial farming and numerous bureaucratic hurdles to investment are some other reasons.

Moreover, mass tax exemptions were offered to potential investors to appear ‘investor friendly’. South Sudan placed no tax duties on inputs and no profit tax for at least four years after leasing. Tunisia also offered a partially exporting or wholly exporting model on 3000 ha.

A catalyst in increasing land acquisitions has been the land lease rate. In Punjab, the minimum rate is Rs 40,000 per acre while in most African nations, for the land with similar characteristics, the rate in terms of Indian currency comes to Rs 700 per acre.

African governments themselves have typically offered very liberal incentives to foreign investors.

The Indian Government, for its part, has both facilitated and encouraged such investment. The Exim Bank has provided concessional lines of credit and soft loans to African governments and to Indian companies engaged in such transactions.

Columbia University economist Jeffrey Sachs described the agricultural land acquisitions as “power grabs,” in which “the rise in food prices is leading to a land grab, as powerful politicians sell foreign investors massive tracts of farmland, brushing aside the traditional land rights of poor smallholders”.

Indian companies insist they are just doing business. Many companies claim the land acquisitions are simply strategies for their expansion and vertical integration, with food security in the forefront.

Even though foreign investment in African land, encouraged largely by host governments, is greatly fostered by the Indian Government and its business associations, there is an inherent contradiction in this, despite claims that the rationale for these practices is centred on food security.

(Apoorva just graduated from the Asian College of Journalism, Chennai.)
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