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May 04, 2009

India joins race for land in Africa, but China is way ahead

After years of competing for overseas oil and mines to fuel their still-growing economies, India and China are silently scouring the world for their next great need: farmland to grow food.

The destination: Africa, where economies are poor and land is cheap.

Buying farmland abroad is not new, but it has gained urgency after a worldwide spike in food prices through 2007 and 2008.

So, more than a dozen companies from India, backed by the government, invested about $2 billion (Rs 10,000 crore) in leasing land and installing plants in Ethiopia last year to produce sugar, tea and several other crops. That number is expected to double to $4 billion this year, said Gurjit Singh, India’s ambassador to Ethiopia.

While India is just warming up, China and rich Gulf states that face graver land and water shortages have been aggressively acquiring land across Africa and some parts of Asia, said a report prepared by the Washington-based International Food Policy Research Institute (IFPRI).

There are others.

Last May, South Korea joined the race, buying 690,000 hectares — about five times the size of Delhi — in Sudan to grow wheat.

Land worth between $20 billion and $30 billion (Rs 100,000 crore and 150,000 crore) was bought in Africa and Asia over the past three years, said Joachim von Braun, director general of IFPRI, who authored the report.

How much land has been sold? Between 15 million and 20 million hectares, which is more than all of Germany’s farmland, said Braun.

“Many governments, either directly or through state-owned entities and public-private partnerships, are in negotiations for, or have already closed deals on, arable land leases, concessions, or purchases abroad,” said the IFPRI report titled ‘Land Grabbing by Foreign Investors in Developing Countries: Risks and Opportunities’.

Unlike earlier, when companies from the developed world bought land for profit, the new deals are driven by spiralling shortages in emerging economies such as India or China, where rising incomes are pushing up demand for food so fast that governments fear domestic production could eventually fall short.

Currently, India’s annual food grain production of 230 million tonnes is just about what the country needs. By 2020, the Planning Commission estimates the demand to grow to 240 million tonnes. There are also forecasts that put the figure as high as 250 million tons.

But economists say, unlike China, India need not look to farmland elsewhere to meet that demand, because it can fill the gap by increasing farm productivity, said Mahendra Dev, chairman of the Commission for Agricultural Costs and Prices, a government organisation that recommends procurement prices for major farm produce.

Still, the Indian government and several companies have intensified the chase for farmland abroad. “Even farmers from Andhra Pradesh have gone and invested in land in Kenya,” said Dev.

Pakistan Defence

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