Want Farm Land?

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The squeeze on land is quite evident in India, as also the squeeze on water. Result is food shortages which is going to get worse with climate change. A possible solution is to lease land in South America or Africa where fertile land is there in plenty. BY HUMA SIDDIQUI

Lush green fields, bountiful crop, happy farmers … no we are not talking about India here if recent reports of our farmers in crisis is anything to go by. With little or no investment in the agriculture sector, it is estimated that 45% of Indian farmers want to quit farming—supply-side constraints have been a major cause for concern.

Add to that rapidly falling water tables in north India – India’s bread basket, and erratic monsoons from climate change leading to domestic food output falling short of demand, a scenario repeatedly sketched by meteorologists and climate change experts.

So what is the way forward? Looking at best practices for sure. But should India also look at Latin America (LatAm) and Africa for food security?

In late 2009, the Ministry of External Affairs started preparing a policy framework to enable Indians to acquire farm land overseas where grain could be grown and shipped back home. This would help address the country’s food security problem, especially during years of drought.

The government of Punjab since 2008-9 has been exploring land leasing in Brazil, Argentina and Mexico to grow food grain for consumption in India. There have been several high level delegations visiting the region, including one by Punjab’s deputy chief minister.

It helped that there is widespread corporate investment in land for food and fuel production in Brazil, Argentina and Uruguay. In many South American countries there is abundance of fertile land. Incidentally, in this region they don’t plough the land, rather they practice what is called Direct Seeding (siembredirecta). They don’t prepare the land by ploughing after the previous harvest. They let the residue from the previous harvest rot and become manure. It aids land fertility.

The region is also well known for cutting edge farm technology. There are no restrictions on foreigners owning land. In some places, land prices are lower than in parts of India.

“The cost per hectare is less than half the price of agricultural land in Punjab,” says R. Viswanathan, former ambassador to Argentina, Uruguay and Paraguay.

Officials here reasoned that since the land acquisition would be by private parties only, the chances of such purchases becoming a political issue were remote. They estimated that Brazil has around 30 million hectares on offer, Argentina 32 million hectares, and Uruguay 10 million hectares with lesser amounts in other countries.

Early investors include Sri Renuka Sugars, one of India’s largest sugar producers, which has signed an agreement with a Brazilian conglomerate Grupo Equipav, to buy a controlling 50.79 per cent stake in it, with which will come control over the company’s vast sugarcane fields.

As yet, however, there is no financing available to buy land in these countries. But unlike in Africa, there is no competition from China. China does have around $ 24 billion invested in South America, but does not encourage private ownership of land.

In fact an increasing number of Indian companies are looking at LatAm as a safe investment destination, mainly because of stable governments and economic policies. These markets are also becoming a potential lifeline as India deals with food shortages and droughts. Earlier, India was bullish on Africa, but political turmoil gradually saw interest shift towards LatAm.

AFRICA BECKONS

This is not to say that India and Africa do not have much to learn from each other. Being the biggest producer of food grain and horticulture crops, India could help the African continent develop its agriculture. Diplomats from India and Africa say Indian industry can help in training and transfer of technology even as it imports pulses from the African continent.

So when the 3rdedition of the India Africa Forum Summit (IAFS) opens in October in Delhi, the two sides along with industry honchos will deliberate on the need for greater cooperation in agriculture and agro-processing, which would have a positive impact on food security in Africa and India. Africa’s farm sector is expected to be worth about $1 trillion by 2030, although this growth will largely depend on adequate technology infusion.

An Indian Exim Bank report states that, “While some parts of northern and southern Africa have increasingly inducted tractors for agriculture, farmers in most parts of Africa still depend on hand-held implements for farming. Africa could learn from India’s Green Revolution, White Revolution and the expansion of its agri-processing industries. Also, ‘tractorization’ of African farms is an area that needs to be addressed.”

Cheap land and low labour costs in Africa are attracting a number of Indian firms with interests in the farm sector. It helps that in countries like Kenya in east Africa, cultivation of tea, coffee, corn, vegetables, sugarcane, wheat and fruits, is widespread, as in India.

India has a well-established national research system, seed sector and testing laboratories in place. In this scenario, an enhanced Africa-India STI cooperation could play a significant role in facilitating African countries for building R&D infrastructure, which is mutually recognized and brings in necessary Mutual Recognition Agreements (MRAs), shares successful mutual practices and expertise, and supplies appropriate planting materials. India has already provided better sugarcane germplasm to Ethopia for higher yields.

Indian companies could help Africa’s agriculture sector in several ways including farm mechanization; agro-processing and storage; investments in training and development of human resources for the farm sector and employment generation; greenfield investments, local vendor development and agriculture exports to neighbouring countries; setting up of agro parks in Africa; and setting up of horticulture industries, floriculture units and contract farming.

The Indian government acts as a facilitator to the whole process. It is supporting the conventional new greenfield foreign direct investments, merger and acquisition purchases of existing firms; public-private partnerships; and specific tariff reductions on agricultural goods imported into India through the negotiation of regional bilateral trade and investment treaties and double taxation (avoidance) agreements.

Not to forget the Indian private sector is the main vehicle through which investments in agriculture are being made. Many business enterprises such as Jain Irrigation, Karuturi Global, Kirloskar Brothers, Mahindra and Mahindra, Ruchi Soya and Renuka Sugars have established their presence in several countries in farm and related sectors. In addition, several new players such as Yes Bank and McLeod Russel are making forays into the agriculture sector in Africa.

Further, while boosting Africa’s agriculture production, India too can meet its food needs with imports from the continent, especially pulses, where India faces a huge shortfall. Besides, Indian industry could also help African governments establish agriculture vocational training schools in their respective countries.

About 65 % of the population of sub-Saharan Africa lives in rural areas, as does bulk of the labour force. For example, in Tanzania, the farm sector provides livelihood to more than 80% of the population and is the anchor of the economy. Farmers are engaged in predominantly small-holder subsistence production, marked by low output. Rudimentary production tools and agricultural technologies, vulnerability to drought conditions, declining soil fertility, climate change and poor access to inputs and capital have led to low productivity per acre.

Precisely because food insecurity is acute in Africa, there is great potential for agricultural transformation. The Comprehensive African Agriculture Development Programme (CAADP), under the aegis of the New Partnership for Africa’s Development (NEPAD), has identified the agriculture sector as an ‘engine of growth’ and a potential ‘sustainable solution to hunger and poverty in Africa’.

ON BALANCE

Experts have said that, “Latin America can meet India’s food needs, a place where agriculture commands the status of IT in India, with the best brains and fortunes in that sector. Indian companies should join US and European companies who have realized this, and participate in the agro value chain there – investing in contract farming to agro-inputs to food processing to logistics.”

LatAm price arbitrage exists in hi-quality farmland – prices ranging from $2000 to $3000 per acre in Uruguay and Paraguay, for ready to farm properties.

According to senior officials who requested anonymity, “Our food security concerns are immediate. The other option that the country has is increasing the acreage under critical crops, however, there is little scope for this and increasing acreage, especially under pulses and oilseeds, which are critical for us, can only be done at the cost of other crops. Not a win-win scenario again. Besides, it would be difficult to maintain status-quo in net cultivated area due to strains from climate change, water shortages and industrialization.”

Since 2006, more than 20 million hectares of agricultural land, an area equivalent to total French agricultural land mass or one-fifth of the total European Union land mass has been taken on lease by several nations. Most of these deals have been done in Africa, LatAm and East-Asia. These partnerships have been largely triggered by the tightening of world food markets.

While the above would be a workable solution in the Indian context, it would be a win-win scenario for host nations in Africa and LatAm. There is immense scope for increasing acreage and crop productivity.

Senior officials from the Ministry of External Affairs and Ministry of Agriculture along with several envoys have been discussing opportunities in contractual farming in these regions.

A FICCI-Deloitte Paper on “India and Latin America & Caribbean (LAC): Business Environment and Opportunities for Collaboration”, notes that with climate change wreaking havoc in agricultural output, India and Latin America could synergize and complement each other to meet the growing food crisis.

India’s raw material needs can be met and its food security facilitated by trade with LatAm and the Caribbean, as the region is transforming into a major supplier of essential raw materials like crude oil, edible oils, minerals and metal products. It also has a large available area of fertile land and abundant water resources. That India holds importance for the region is evident from the fact that former Brazilian President Lula da Silva visited India thrice during his administration.

Summary

  • India needs to look at leasing land in South America and Africa to overcome land and water shortages at home
  • Fertile land is available in plenty in Brazil, Argentina and Uruguay and Punjab government officials have visited these countries
  • Africa is also emerging as a good investment destination when it comes to farmland and some Indian companies are already there
  • Cheap land and low labour costs in Africa are attracting a number of Indian firms with interests in the farm sector. It helps that in countries like Kenya in east Africa, cultivation of tea, coffee, corn, vegetables, sugarcane, wheat and fruits, is widespread, as in India

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