Readers may recall that AgriMatters had reported the increasing trend of China and the West Asian countries picking up good quality agricultural lands in Central Asia, Africa and Latin America. West Asia has all the petro dollars to fund such acquisitions which also ensure food security for them in the long run, and China wants to leverage its large market, large labour force and huge inventory of farm machinery and equipment to keep food inflation within limits in China. Even as China liberalizes its economy, the one area that the state is very sensitive about is the prices, availability and access to food for the people. Naturally as land is becoming scarce, and wage rates in rural areas aspiring to keep pace with those in urban centres or industrial townships, agriculture outsourcing makes sense for China.
Many countries in EU are also establishing Sovereign Wealth Funds for this purpose, or giving concessional credit lines to their larger corporate entities to acquire such lands. Interestingly, this is not just ‘demand led’ but also ‘supply driven’ as many countries, especially those which have large tracts of land, and scanty populations are now actively seeking partner countries/corporations to bring these lands under the plough . India is also receiving many such offers, and farmers and corporate entities in Punjab, Gujarat, Andhra and Karnataka have shown interest. The objective is to increase agricultural production in respective countries to reduce their dependence on import of food grains and export of surplus food grains to other countries.
Considering that issues relating to land rights are very sensitive and have often led to conflict, the government has been cautious. Also, while India has rich experience of smallholder farming, the experience of large scale commercial/ corporate farming is very limited. However, many developments are taking place in the world of agriculture in India. Besides increasing pressure of population on agricultural land and other critical inputs, the Rural Employment Guarantee Act has shot up rural wages, and also increased demand for goods (including agricultural goods) at the bottom of the pyramid. Thus the farmer has to depend more and more on self labour, as also that of the extended family. Farm mechanization offers a solution, but it is quite capital intensive, and requires a high degree of institutional calibration. All this has to be read in conjunction with the global shortages of food grains leading to high degree of volatility in prices of food grain worldwide. This opens up the possibility of taking up such ‘global operations’ to meet demand-supply gap in domestic market in commodities such as oilseeds and pulses, in which the gap is so wide that even when special thrust is given to improving their production, productivity and area under coverage, there is no substitute to imports.
Therefore, it is important that as a nation, the issue must be examined in all its pros and cons, and a clear stand taken, as has been done by other countries. It should also be noted that the issue of foreign countries offering land for cultivation to Indian companies / farmers was raised by many Heads of Missions in their Annual Conference last year. The countries which have shown interest in inviting Indian farmers/ corporates include Mongolia, Sudan, Trinidad & Tobago, Egypt, Ethiopia, Senegal, Tunisia, Uganda, Kenya, and some other Latin American countries. Following this meeting, a Cell was established in the Department of Agriculture and Co-operation, Government of India to facilitate interface between our missions on the one hand and Indian stakeholders on the other. An interaction session has also been held with the solvent Extraction Association, the Sugar Mills Association and seed producer companies. However, these have been sporadic efforts, and The Indian Ambassador to Argentina, Uruguay and Paraguay has also written to the Ministry on this issue. He has argued that Indian Companies invest in agricultural land in South America, as one of the strategic options for India’s food security. The region has abundant water resources, large areas of fertile land and the potential to bring under cultivation another hundred million hectares. It has high yields, large exportable surplus, advanced technologies, and best practices and is pioneering a new agribusiness model “Agricultural Process Outsourcing” (APO), similar to the BPO and KPO business of Indian IT companies. With these strong fundamentals, South America is emerging as an agricultural powerhouse in the context of the growing global concern on food security and water scarcity.
He goes on to add that large landholdings by foreign companies in South America are not a politically or socially sensitive issue, as in Africa. Land can be bought from the private sector as a commercial transaction.
The trend for acquisition of land by foreign investors in developing countries has been studied, among others , by the International Food Policy Research Institute (IFPRI). According to IFPRI one of the effects of the food price crisis of 2007-08 on the world food system was the desire to control farmland in developing countries ensure their food supplies. Increased pressures on natural resources, water scarcity, and export restrictions imposed by major producers when food prices were high, and growing distrust in the functioning of regional and global markets pushed countries short in land and water to find alternative means of producing food.
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. In addition, countries with large populations and food security concerns such as China and South Korea are also seeking opportunities to produce food overseas. Some Indian companies are also in the process of acquiring land. These investments are targeted toward developing countries where production costs are comparatively lower ,and land and water more abundant. Other factors that influence investments include geographic proximity and climatic conditions for preferred staple .Many countries are also seeking land for the production of bio-fuel crops. Sometimes, food supplies are being secured through contract farming and investment in rural and agricultural infrastructure including irrigation systems and roads.
About the cost and benefits of these land acquisitions, it can be said that they do offer good opportunity for producing and exporting but it has to be backed with investments in rural infratsructre. There are also concerns about the impacts on poor local people, who risk losing access to and control over land on which they depend. It is crucial to ensure that these land deals, and the environment within which they take place, are designed in ways that will reduce the threats and facilitate the opportunities for all parties involved. Therefore Hamlet’s dilemma is kicking and alive to this day!