Millennium Post

How India facilitates land-grabbing trend in Africa

In the recent years, India has joined several countries that are running short of enough arable land and water to meet their future food-production needs, and have begun adopting ‘national food security’ strategies that involve taking new steps to secure agricultural lands overseas, or what is referred to as ‘agricultural outsourcing’ of food production. This trend has caught up following the food inflation in the world markets in 2008, when grain and soybean prices more than doubled, which alarmed many food-importing countries. In response, many of these countries began adopting policies to incentivise their firms to invest overseas in food production for crops that would be sent home to their national markets. By doing so, India and other countries are hoping to avoid future high prices and bypass price volatility on world markets by locking-in early production guarantees through their firm’s foreign investments in agricultural lands abroad.

Before 2008, the average increase in the land used for agricultural production was about four million hectares annually, but then this jumped dramatically. The most comprehensive survey of the global trend was published in 2012 by the Land Matrix project, which documented 1,006 investments between 2000 and 2012 involving the purchase or leasing of over 70.2 million hectares, with most occurring since 2008.

The Indian government as well as firms claim such investments will help build the efficiency of the agricultural sector in the host countries, and therefore offer a ‘win-win’ scenario. The size, scale and speed of the trend in recent years, however, have alarmed small farmers associations, social movements and human rights and development organisations, who criticise such foreign investments as ‘land grabbing’. They point to serious concerns about the harmful impacts some deals had on the human rights of displaced local residents and smallholder farmers due to poor governance in the host countries. There are also serious concerns that many foreign investors are expanding the large-scale corporate model of monoculture agriculture that is heavily dependent on high water usage, pesticides and herbicides and is considered environmentally unsustainable. This model contrasts with the emerging international scientific consensus on the environmental benefits and output efficiency of smaller-scale, agro-ecological and organic farming methods and the importance of supporting the land rights of small farmers.

 According to the Land Matrix data, Indian companies have acquired almost 7.4 million hectares abroad in 129 separate deals between 2000 and 2012, placing India among the top three countries in the world which have bought or leased land in other countries. It acquired these tracts of land for agriculture, as well as forestry for wood or fibre and mineral extraction, including petroleum.

Paradoxically, India is also among the 10 top countries in which other countries have bought or leased land, with up to 4.6 million hectares having been transacted in 113 separate deals as of April 2012. Also paradoxically, the controversial issue of Indian companies involved in overseas 'land grabbing' comes at a time when there is controversy over acquisition of farm land within India for industrial development.

The pull and push factors

Among the key ‘push’ factors driving India’s efforts to expand the outsourcing of its domestic food production are concerns over national food security, access to water, and the diversion of agricultural land from food to bio fuels production. Among the key ‘pull’ factors are the alluring incentives and new business opportunities offered by host countries.

India faces the challenges of a huge population, growing urbanisation and a rising middle class, and projections that demand for food will outstrip the production. Farming in India is currently challenged by the declining land-base for agricultural operations, diminishing water tables, a shortage of farm-labour, fragmented land-ownership, increasing costs of inputs and uncertainties associated with prices. While India is currently self-sufficient in cereals, India’s consumption of edible oil seeds is rising continuously, outstripping domestic production and resulting in a growing dependency on imports. According to the State of Indian Agriculture 2012-2013 report, during
2011-2012, India imported about 9.2 million tonnes of edible oils which was about half of its domestic requirement.

In response to the food price hikes of the 2008, the Indian government established a Working Group on agricultural production chaired by Haryana chief minister B S Hooda; in the same year, the Indian Ministry of External Affairs suggested that the purchase or lease of overseas land for cultivation by firms should be supported with new policy incentives, including lifting restrictions on outward foreign direct investment (FDI) by Indian companies and facilitating access to credit for such investments, with the intention that 'the crops grown in these farms would then be shipped to India'. And at the sixth Agriwatch Global Pulses Summit in New Delhi in 2010, India's Food and Agriculture Minister Sharad Pawar asked the delegates to ponder the ‘viability of Indians leasing land abroad for growing pulses and exporting it back to India.’

Indian companies are also being attracted by generous incentives offered by many host governments in Africa and other developing regions. This includes access to huge tracts of land at very low prices, long-term leases, tax breaks on needed capital imports and other types of tax holidays, favourable trade policies, access to water resources, and the ability to fully repatriate the profits generated. Many host governments have amended their domestic laws to facilitate the entry of foreign firms in the agriculture sector. According to a report in The Indian Express, for example, the land lease rate in Punjab’s Doaba region is a minimum of Rs 40,000 per acre, whereas in most African nations the land lease rate is about Rs 700 per acre. This means that for every one acre in Punjab, Indian investors can own 60 acres in Africa.

So while the Indian government has been driven by food security issues, Indian agricultural companies have also been pressuring the government to play a more proactive role in facilitating their ability to buy or lease land abroad. Many point to the rapid rise in investment by Chinese agricultural companies in Africa with the active support of the Chinese government and advocate for a similar role to be played by the Indian government.

No win-win situation

In response to criticisms of land grabbing, Indian companies argue their foreign investments offer a variety of benefits for Africa’s long-term agricultural development, and that Indian agricultural companies can provide important benefits, including: improved domestic farm mechanisation, agro-processing and storage infrastructure; assisting tractorising their farm sectors; provide higher qualities of quality seeds to farmers in Africa; build roads infrastructure connecting farms to markets; improve post-harvest management; establish agro-industry parks in Africa; and establish agriculture vocational training schools.

However, the win-win scenarios portrayed by government officials and companies were challenged in a 2011 report by the Delhi-based Economics Research Foundation and the international advocacy organisation GRAIN, which detailed five disclosed contracts between Indian agricultural investors and the Ethiopian government (including Karuturi Ago Products and Verdanta Harvests, two firms which have courted controversies). Critics say the lack of detail in the contracts raises questions about the limited obligations of investors towards local people and the environment. The contracts, all for operations in Ethiopia’s Gambela Regional State and ranging for terms between 25 and 50 years, specified that the companies were to ensure that environmental impact assessments were undertaken and that the investors would otherwise abide by current Ethiopian conservation laws, but they did not specify who would undertake these assessments, the quality or scope of such assessments, the transparency of the process, or, if they were to identify environmental problems or threats, what remedial actions would be taken by the companies.

All five contracts stated that the Indian companies have the ‘right’ to provide local residents with power, health clinics, schools, etc., however these were not listed under the firm’s ‘obligations’. None of the contracts mentioned compensation for any peoples displaced, nor anything about prior informed consent. Nor did the contracts specify labour laws, wages or working conditions for their local employees. The contracts did not address the high-profile claims by the companies and government regarding the increase in agricultural productivity and transfer of new technologies to local farmers. The absence of detail on these points is alarming given the potentially negative impacts they have on local populations and the environment.

Government initiatives to facilitate ‘land-grabbing’

There are a number of ways in which the Indian government facilitates the process of outsourcing food production overseas by Indian firms. These include new initiatives in key policy areas such as trade and investment agreements, increased Export-Import Bank (Exim Bank) lines of credit, and reforms to ease outward FDI by Indian companies.

In 2002, India launched its ‘Focus Africa’ programme, led by the Ministry of Commerce and administered by India’s Exim Bank, which provides lines of credit to countries to facilitate new opportunities for trade and investment by Indian firms. The lines of credit also support the exports of eligible Indian goods on deferred payment terms. Currently, Exim Bank has in place 86 lines of credit, of which 50 are being extended to 39 African countries. Although the Exim Bank’s lines of credit are used for a wide variety of investments, wherever projects involve agricultural development, Indian foreign investors stand ready to win lucrative concessions and contracts for FDI in agricultural projects, some of which are facilitating the 'land grabbing' trend. According to the Indian Development Cooperation Research, 36 percent of the active lines of credit for Africa during 2011-2012 were directed towards the agricultural sector.

In 2008, India hosted the first India-Africa Forum Summit in New Delhi and introduced initiatives to increase the level of Exim Bank lines of credit to Africa from about $2 billion to $5.4 billion by 2013. In 2011, at the Second Africa-India Forum in Addis Ababa, African Trade Ministers and the Indian Minister of Trade and Commerce met and agreed to strengthen trade relationships, build trade-related capacities, and conclude negotiations for trade agreements between African regional economic communities and India. In October 2013, the Indian Government attended the third India-Africa Trade Ministers meeting in Johannesburg, where the Commerce Minister Anand Sharma noted that the value of India-Africa trade crossed over $70 billion in 2012, and called for raising the bilateral trade to $200 billion by 2020. (At the 8th CII EXIM Bank Conclave on India-Africa Project Partnership in Delhi in March 2012, when Sharma stated that close to 900 million hectares of farmland in Africa were not being 'properly utilised' and this was a reason to justify India’s interest in acquiring African farmland.)

Investment agreements have also been a key part of India’s increased involvement with Africa and other developing countries, and have facilitated overseas agricultural investments by Indian companies. These include Bilateral Investment Treaties (BITs), similar Bilateral Investment Promotion and Protection Agreement (BIPAs), as well as investment chapters within broader Free Trade Agreements (FTAs), and establish strengthened and clarified guarantees for foreign investors’ rights, reductions in tax burdens for international investors and other streamlining measures to facilitate investment.

These agreements have been undertaken with the cooperation of leading business associations such as CII, ASSOCHAM, and FICCI, as well as by sector-specific groups, such as the Consortium of Indian Farmers Association (CIFA) and the Solvent Extractors Association (SEA) of India. These business associations and agricultural companies have participated in dozens of high-level business conclaves, trade fairs, and official trade delegations to countries which are interested in luring Indian agricultural firms. All these groups are active in lobbying the Indian government to pursue even further reforms to trade policy, Exim Bank credits and the rules on outward FDI.

For example, in 2005, the Conclave of India-Africa Project Partnership was launched as periodic platform for furthering business-to-business relations between the two regions. The investment deals agreed at such business conclaves have increased in value from US$ 6 billion in 2005 to $64 billion in 2013. In 2013, CEOs from major Indian and African companies met in Johannesburg under the umbrella of the recently established India Africa Business Council (IABC), which is intended to serve as a permanent institutional platform for sustained exchanges between the business communities of India and Africa.

Other steps that India has taken to facilitate agricultural outsourcing include reforms by the Reserve Bank of India to make it easier for Indian companies to undertake larger overseas investments and raise more capital in international markets, and stepped-up support for enhanced overseas investment insurance by India’s Overseas Investment Guarantee and Export Credit Guarantee Corporation to provide risk guarantees and other protections for Indian investments abroad.

In 2011, the Indian Ministries of Agriculture and Commerce were deliberating over further reforms to India’s overseas investment policy, with an emphasis on agriculture due to the national food security programme. One issue is whether India will compulsorily buy back agricultural produce, or if will there be an option to exercise the righ t to buy. Sources in the Department of Agriculture said it is difficult to ensure any business enterprise is bound to repatriate the produce to India if that does not make business sense, but according to one official, ‘This is where the government's role is significant in channelising agents who can get into contract farming or lease lands to private parties.’ He added, ‘Primarily, the government has to be the nodal authority and give fund support if the produce needs to be brought back to India.’

In March 2012, The Economic Times reported that the Indian government has decided ‘to throw its might behind private purchases of farm land overseas to ensure food security for India.’ Agriculture Secretary P K Basu said the ministry was seeking views from other ministries on plans to help private Indian companies buy farmland abroad. Reportedly, a range of possible institutional mechanisms to extend state support to Indian companies’ acquisition of farm land abroad were being considered, including guaranteed buybacks of harvests from the cultivation overseas.

However, increasing international pressure by civil society organisations, academics and the United Nations over the environmental and human rights issues related to ‘land-grabbing’ have contributed more recently to a policy backlash which has led some host countries to reconsider their generous offers to foreign investors.  Some African countries have begun enacting new limits and restrictions on foreign investment in agriculture. The Ethiopian government, for example, recently limited the amount of land allocated to any potential foreign investor to 5,000 hectares, and said it will give priority to local investors. Similarly, Tanzania has taken recent steps to dramatically curb agricultural investments by restricting the size of land that single large-scale foreign and local investors can lease for agricultural use.

Karuturi Global, an Indian company, made international headlines in 2008 when it leased 3,00,000 hectares of land in southern Ethiopia with the stated aim of becoming the world’s largest food producer. But five years later, the slow progress of Karuturi and other investors to bring land into production was a factor in moving the Ethiopian government to reassess its policy of leasing vast tracts of land to single investors and reducing the size of Karuturi’s lease to 1,00,000 hectares.

Such backlashes suggest that the profit-maximising motives of Indian agricultural firms and the Indian government’s agricultural outsourcing strategy in Africa may face growing constraints in the future.

Rick Rowden is a PhD candidate in economic studies and planning at Jawaharlal Nehru University (JNU) in New Delhi. This article is based on a forthcoming report by the South-South Initiative of the international development NGO, ActionAid.

Conceived by Kalyan Mukherjee, Consulting Editor, Africa Rising
Research by Aman Ramrakha
Guest Editor: Abhishek Choudhary
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