Indian Government Support
for Overseas “Land Grabbing”
by Indian Agricultural Companies
By Rick Rowden,
PhD Candidate, JNU
Produced for
ActionAid International
July 2014
New Delhi, India
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Contents
I. Overview -- India’s Role in the Global Land Grab
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II. Driving Factors for India’s Involvement in the Global Land Grab
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Food Security
Virtual Water: behind every land grab is a water grab
Biofuels
Host Country Incentives
Business Opportunities
III. Indian Government Facilitation of Overseas Land Grabbing by Indian Companies
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Trade & Investment Diplomacy
Investment Agreements
EXIM Bank Lines of Credit
RBI Reforms to Facilitate Outward FDI
ECGC – Overseas investment insurance
New Initiatives Being Considered
IV. Political Responses to Land-Grabbing .
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V. References .
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Some Host Countries Place New Restrictions on Agricultural Investments
Advocacy Against “Land Grabbing”
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VI. Annexes
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A Sample of Indian Companies Investing in Agricultural Land Overseas
Land Grabbing in a South-South Context .
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Major Steps in Liberalizing India’s Overseas Investment Policy
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Recent State Restrictions on Foreigners Getting Farmland .
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I. Overview -- India’s Role in the Global Land Grab
In recent years, several countries that are running short of sufficient arable land and water to meet
their future food-production needs have begun adopting “national food security” strategies, and
taking steps to secure agricultural lands overseas, or what is referred to as “agricultural outsourcing”
of national food production. This trend has increased rapidly in recent years following the global
shock of much higher food prices on world markets in 2008, which alarmed many food-importing
countries. In response, many of these countries began adopting policies to incentivize their firms to
invest overseas in food production for crops that would be sent home to the national market. By
doing so, such countries hoped to avoid future high prices and bypass price volatility on world
markets by locking-in early production guarantees through their foreign investments in agriculture
abroad.
This report examines such policies as adopted by the Indian Government in recent years to
incentivize Indian agricultural firms to invest in agriculture overseas as part of its national food
security strategy.
The most comprehensive survey of the global trend was published in 2012 by the Land Matrix
project, a coalition of 45 NGOs, which documented 1,006 investments between 2000 and 2012
involving the purchase or leasing of over 70.2 million hectares, with the bulk of these acquisitions
having occurred since just 2008 (Land Matrix 2012). The study also found that Eastern Africa has the
largest number of recent investments, with 310 deals; Indonesia is the country with the largest area
of land acquired by investors – 9.5m hectares; and the Indian Government, Chinese
telecommunications firm ZTE International and Indonesian company Indah Kiat Pulp & Paper are the
top three investors, having acquired more than 10m hectares around the world between them (Land
Matrix 2012).
While many companies and governments 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 have alarmed small farmers, social movements and national and
international advocacy organizations, who criticize such foreign investments as “land grabbing”.
Serious concerns have emerged about the harmful impacts some deals have had on the human
rights of local residents and smallholder farmers due to bad governance. 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. 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 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, 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 (Land Matrix
2012). Also paradoxically, the controversial issue of Indian companies involved in overseas “land
grabbing” comes at a time when a major controversy is brewing over acquisition of farm land within
India for industrial development. (ANNEX 1 offers a list of examples of Indian overseas agricultural
investors and details on their recent land deals).
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Below, this report details the key driving factors for India’s involvement in the “global land grabbing”
trend, documents a range of policy measures recently adopted by the Indian Government to
facilitate such foreign investments by Indian companies, and highlights recent efforts by citizens and
social movements to mobilize against “land grabbing” at national and international levels.
II. Driving Factors for India’s Involvement in the Global Land Grab
At least five key factors have been driving India’s recent efforts to expand the outsourcing of its
domestic food production. These include: food security concerns; access to water concerns; new
markets for biofuels; alluring host country incentives; and improved business opportunities.
 Food Security
As is the case with China, India faces the challenges of a huge population, growing urbanisation and
a rising middle class, and projections that demand for food will outstrip the capacity of domestic
production due to diminishing arable land and serious water shortages for irrigation.
The consumption of edible oil seeds is rising continuously, outstripping the domestic production
resulting in huge imports. During 2011-12, India imported about 9.2 million tonnes of edible oils
which was about half of its domestic requirement. Edible oil demand is projected to reach 16.64
million tonnes by 2016-17, requiring 59 million tonnes of oilseeds production provided the
proportion of different oilseeds remains constant in the coming years. Oilseed cultivation is
undertaken across the country in about 26 million ha on marginal lands, dependent on monsoon
rains, nearly 72% of area under oilseeds is rainfed and with low levels of input usage (State of Indian
Agriculture 2012-2013).
The declining land-base for agricultural operations, diminishing water tables, shortage of farmlabour, increasing costs of inputs and uncertainties associated with prices/realisation which impact
the viability of farming are some of the formidable challenges the agriculture sector faces. While the
country is presently self-sufficient in cereals, nearly half of India’s domestic requirement of edible
oils is met through imports (State of Indian Agriculture 2012-2013).
India recognized its vulnerability to world markets during 2007-2008, when world grain and soybean
prices more than doubled. As food prices climbed everywhere, some exporting countries began to
restrict their grain exports in an effort to limit food price inflation at home. This caused a panic
among food-importing countries. Following this food price shock on global markets, India joined
with other countries in considering “agricultural outsourcing” as an option.
In the wake of runaway inflation and the ensuing food crisis, India’s prime minister constituted three
high-powered committees of chief ministers and central ministers to recommend ways of containing
inflation and boosting agricultural production. The Working Group on agricultural production was
chaired by Haryana chief minister B.S. Hooda, with chief ministers of West Bengal, Punjab and Bihar
as members. Recommendation number 33 of the Hooda Committee report suggested that, like
many other countries who have “shopped for land abroad for growing crops to meet consumption
needs,” Indian companies could also be encouraged to buy lands in other countries for producing
pulses and edible oils. “We should seriously consider these options” (Patnaik 2010).
In 2008, the Indian Ministry of External Affairs discussed various proposals for overseas land
acquisition at a top-level meeting and suggested that purchase of overseas land for cultivation
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should be supported with policy incentives, including lifting restrictions on outward foreign direct
investment (FDI) by Indian companies and facilitating access to credit for such investments. The
Ministry suggested that the liberalization of outward FDI rules would help Indian companies and
public sector organisations to purchase land abroad for cultivation, “and the crop grown in these
farms would then be shipped to India” (Subramaniam 2008). Senior officials of the government-run
State Trading Corporation (STC), which imports edible oil and pulses, also expressed interest in
buying land overseas, but insisted the government needed to take pro-active steps: “Arrangements
have to be made for exporting the produce to India. Transportation and logistics are important in
such cases. We should also make sure that local governments do not stall exports to India”
(Subramaniam 2008).
Sanjeev Chopra of the Indian Ministry of Agriculture, explained: “A large country like India cannot
depend on food imports to meet the anticipated shortages given the small proportion of food
production that is internationally traded, as well as the likely increase of demand in other countries.
There is also a strategic aspect to be considered in trying to meet structural shortages of food
products in international spot markets. Therefore, offshore agriculture investments emerge as a
necessary concomitant to India’s policy framework for addressing food security” (Chopra 2011).
Chopra, added: “It must also be clarified that the option of sourcing pulses, oilseeds and sugar from
across our borders has to be mainstreamed in the food policy scenario of the country, because the
gap between the demand and supply projections of these three agri-commodities is increasing with
every passing year, especially as incomes rise, population increases, longevity grows and available
land declines. It is the unprecedented rise in the prices of these three commodities that set the food
inflation spiral, and if options are available to outsource the production of these commodities to
Latin America and Africa, it may well be a win–win situation” (Chopra 2010).
Following a 2009 visit to India by Namibian President Hifikepunye Pohamba, then Minister for
External Affairs Shashi Tharoor said: “We are now in talks with Namibia after their President's visit,
to use land for our purposes.” 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 over the “viability
of Indians leasing land abroad for growing pulses and exporting it back to India.” The minister openly
urged Indian agricultural entrepreneurs to grow lentils in Africa and South America. He said while
the Ministry would not invest in directly buying land abroad, it would act as a facilitator.
 Virtual Water: behind every land grab is a water grab
Declining supplies of water available for irrigation is a growing concern in India and a key driving
factor in its policy of outsourcing agricultural production. Indian officials were alarmed by 2009 study
by NASA that used satellites over Northern India and found it is losing about one foot of its
groundwater each year (NASA 2009). Further studies show that groundwater levels in Punjab will fall
to below 100 feet by 2020 so that many of the existing pumps and irrigation will stop working.
Recent estimates put India's annual abstraction for irrigation at 250 cubic kilometres per year, about
100 cubic kilometres more than what is replaced by rains. As a result, India's underground water
reserves are plunging, forcing farmers to drill deeper every year. All together, a quarter of India's
crops are grown using underground water that is not replenished (GRAIN 2012).
Behind the headlines about “land grabbing” is another phenomenon referred to as “water grabbing”
– or the increasing movement of “virtual water” around the world through the agricultural
investments. This is because water is used when growing crops. For example, it requires 140 litres of
water to produce enough coffee beans for one cup of coffee; it requires about 1,000 litres of water
to produce one kilogram of wheat; and about five to ten times more water to produce one kilogram
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of meat; and it takes nearly 5,400 litres of water to grow enough cotton to produce a single pair of
jeans (Oakland Institute and Polaris Institute 2011). Therefore, “virtual water” is the amount of
water that is embedded in food or other products needed for its production and the international
trade in agricultural commodities amounts to trade in virtual water.
Computer analysis of the global movement of virtual water as reflected by global agricultural
commodities trading, shows a worrisome trend in increasing global inequality in access to virtual
water. For example, Europe, already with considerable water resources, is one of the main importers
of virtual water in the world, often from places that regularly experience droughts and shortages.
For the United Kingdom it is estimated that two-thirds of all the water that its population needs
comes embedded in imported food, clothes and industrial goods. The result is that when people buy
flowers from Kenya, beef from Botswana, or fruit and vegetables from parts of Asia and Latin
America, they may be exacerbating droughts and undermining countries' efforts to grow food for
themselves.
When countries such as India seek to outsource their agricultural production, this is a way of
relieving pressures over domestic water resources and transferring these pressures to other nations.
With global water demand projected to outstrip supply by 40 percent within the next 20 years, the
competition to secure water resources will grow significantly in the next two decades (McKinsey &
Company 2012). It is estimated that by 2050, the predicted increase in ‘virtual water’ exports could
cause up to an 18 percent reduction in the water available for small-scale agriculture worldwide.
Many of the biggest land deals in Africa in recent years have involved large-scale, commercial
agriculture, which will require large quantities of water and mineral fertilisers. Nearly all of the
foreign land deals are located in Africa's major river basins: the Congo, the Niger and the Nile.
Collectively, three of the main countries in the Nile basin - Ethiopia, Sudan and South Sudan - have
already leased about 8.5 million hectares. Peter Brabeck-Letmathe, the Chairman of Nestle, says that
these deals are more about water than land: “With the land comes the right to withdraw the water
linked to it, in most countries essentially a freebie that increasingly could be the most valuable part
of the deal” (GRAIN 2012).
 Biofuels
The conversion of agricultural lands from food crops to biofuels production has been a key factor
driving the growing “land grabbing” trend. For example, the European Union’s target to use
renewable energy for 10 percent of the fuel used in transport by 2020, has led to a big drive all over
the word to grow jatropha. Predictions are that global demand for biofuels will hit 172 billion litres
by 2020, up from 81 billion litres in 2008. At current production levels, that would mean an
additional 40 million hectares of land would have to be converted to growing crops for biofuels.
Other estimates range from between 18 and 44 million hectares by 2030 (GRAIN 2013).
While China and India are considered the potentially biggest future markets for biofuels
consumption, both countries are hesitant to use domestic grains for biofuels due to food security
concerns. China has banned the further construction of ethanol plants that use grains and is
exploring production of non-grain crops on marginal lands, with little success so far. In India,
domestic ethanol targets focus on sugar cane, while biodiesel targets focus on jatropha, both of
which have failed dramatically to produce much supply. In this context, companies from the two
countries have been encouraged to look overseas at opportunities for biofuel production (GRAIN
2013).
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 Host Country Incentives
In addition to the “push factors” driving Indian agricultural companies to go abroad, it is important
to note that there are strong “pull factors” at work which are also driving this trend. Primary among
these are the eager invitations to Indian companies by many governments in Africa and other
developing regions. Many governments of developing countries have been willing to offer Indian
companies and other foreign investors access to huge tracts of land for the purpose of growing
commercially viable agricultural products, such as cut flowers, biofuel crops, cotton and some edible
produce. The incentives include long-term leases and extremely low prices, 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 governments are amending their domestic laws to facilitate the entry of foreign firms in the
agriculture sector. For example, in Indonesia, where India-based KS Oils is investing in edible oil
production, the government is supporting the approval of Land Acquisition Bill that will allow larger
scale investments. And lawmakers in the Philippines are pushing for amendments to the 1987
Constitution to allow 100 percent foreign ownership of land (Corpuz 2013).
In fact, in 2009, it was in response to offers by several other countries for agricultural investments by
Indian companies that led the Indian Ministry of Agriculture to gather domestic farmers associations
and agri-business organizations to examine the proposals (Goswami 2010).
 Business Opportunities
Indian agricultural firms have faced increasing challenges to expanding their domestic business
opportunities. These include: reductions on access to arable land due to the overuse of pesticides
and other chemicals as well as the drop in water tables; land is increasingly being directed towards
residential and commercial uses; the average size of a farm is going down creating the problem of
land fragmentation and a lack of large, contiguous plots of land for exploiting economies of scale.
Such challenges have made Indian agricultural firms more interested in considering overseas
investments.
The welcome offers of large tracts of cheap land, water, tax breaks and subsidies can make overseas
investment more alluring to Indian agricultural firms. S.N. Pandey, an executive with Lucky Group,
which has invested in Africa, explained: “The cost of agricultural production in Africa is almost half
that in India. There is less need for fertiliser and pesticides, labour is cheap and overall output is
higher” (GOI Monitor 2011). According to a news report in The Indian Express, “The land lease rate
in Punjab’s Doaba region is a minimum of Rs 40,000 per acre. In contrast, in most African nations,
the land lease rate in terms of Indian currency comes to Rs 700 per acre. This means that for every
one acre in Punjab, Indian investors can own 60 acres in Africa. With a per capita land holding of 1.5
acres in Punjab, agriculture is ceasing to be a sustainable activity” (GOI Monitor 2011).
Such factors have led the Indian domestic agricultural sector to pressure the Indian 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 played by the Indian Government
(Subramaniam 2008).
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. They claim Indian agricultural
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companies can provide: 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 was challenged
in a 2011 report by the New 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 those for Karuturi Ago Products, BHO Bio
Products, Ruchi Agri, Sannati Agro Farm Enterprise and Verdanta Harvests. 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 the
environmental impact 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 or how such would be enforced (Rowden 2011).
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 ‘obligations’ of the
investors. None of the contracts mentioned compensation for any peoples displaced. 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 (Rowden 2011). The
absence of detail on these points is alarming given the potentially negative impacts they can have on
local populations and the local environment.
III. Indian Government Facilitation of Overseas Land Grabbing by
Indian Companies
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 4 key policy areas: 1) trade
policy reforms and stepped-up high-level diplomacy for signing new international trade and
investment agreements with African and other countries to facilitate the entry of Indian foreign
agricultural investors and the export of certain foods back into India; 2) increased lines of credit
offered to foreign countries from India’s Export-Import Bank (EXIM Bank) as part of India’s expanded
foreign aid programs, which are used by countries to purchase Indian goods and services; 3) specific
reforms by India’s central bank, the Reserve Bank of India (RBI), to make it easier for Indian
companies to undertake larger overseas investments and raise higher amounts of capital in
international markets; and 4) support for enhanced overseas investment insurance by India’s
Overseas Investment Guarantee (OIG) and Export Credit Guarantee Corporation (ECGC) to provide
risk guarantees and other protections for Indian investments abroad.
In addition to initiatives in these four basic policy areas, the Indian Government and Ministry of
Agriculture are currently pursuing advice on establishing additional reforms and new initiatives to
further incentivize Indian firms to engage in agricultural outsourcing.
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 Trade & Investment Diplomacy
India has made significant efforts towards expanding its South-South trade and investment in the
last 10 years, with a notable increased focus on Africa. In recent years, efforts to facilitate
agricultural outsourcing have been one part of this broader agenda as India has engaged in several
high-level trade and investment summits with Africa, other developing countries and the BRICS
(Brazil, Russia, India, China, South Africa). (See ANNEX 2 for a brief overview of land grabbing within
BRICS and South-South relations).
India launched its “Focus Africa” program in 2002, 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. Some of these credits have been directed at
various trade promotion organizations and export promotion councils in Africa. The program
particularly targeted India’s engagement in African markets by way of leading regional economic
blocks, such as the Economic Community of West African States (ECOWAS) and the Common Market
for Eastern and Southern Africa (COMESA). In 2005, India became a full member of the Africa
Capacity Building Foundation (ACBF) and was granted observer status in COMESA, SADC and
ECOWAS.
India hosted the first India-Africa Forum Summit in New Delhi April 9, 2008, and signed the Addis
Ababa Declaration and the Africa-India Framework for Enhanced Cooperation, which identified the
development of sustainable agriculture as a key priority in the burgeoning partnership between
India and Africa. Among the many initiatives that India announced at the summit were: an increase
of the existing level of Exim Bank lines of credit to Africa from about US$ 2 billion to US$ 5.4 billion
by 2013; a duty-free tariff preference scheme for 44 least developed countries (LDCs), including 34
African countries; and support to Africa’s regional integration efforts and provision of financial
support to the African Union (AU) and the New Partnership for Africa’s Development (NEPAD),
including a US$ 200 million line of credit to NEPAD. The Addis Ababa Declaration stated that Africa
and India agreed that agricultural development is an effective approach to ensure food security,
eradicate poverty and improve peoples' livelihoods, and agreed to strengthen Africa and India
cooperation in this sector in order to improve the food security of Africa and to increase its exports
to world markets” (IANS 2011).
In 2011, the Second Africa-India Forum was held in Addis Ababa, Ethiopia on 21 May 2011, at which
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 regional economic communities and India. It was also decided that the
ministerial trade meeting would take place annually as an "India-Africa Trade Ministers’ Dialogue”
(PTI 2013).
In October 2013, the Indian Government attended the third India-Africa Trade Ministers meeting in
Johannesburg, and announced it is stepping up efforts to conclude the talks with Southern Africa
Customs Union (SACU) for a preferential trade agreement and similar agreements with several other
regional communities in Africa. And a joint study is underway to work out a free trade agreement or
a preferential trade agreement with COMESA (Common Market for Eastern and Southern Africa). At
the meeting, Indian Commerce and Industry Minister Anand Sharma noted that the value of IndiaAfrica trade crossed over US$ 70 billion in 2012 and is expected to easily reach the projected target
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of US$ 100 billion by 2015. He called for raising the bilateral trade to US$ 200 billion by 2020 (PTI
2013).
The desire to use trade agreements to facilitate agricultural outsourcing was discussed openly at the
8th CII EXIM Bank Conclave on India Africa Project Partnership in New Delhi in March 2012, when
Mr. Sharma stated that close to 900 million hectares of farmland in Africa were not being “properly
utilized” and this was a reason to justify India’s interest in acquiring African farmland. At the
conference, the Vice President of Zimbabwe vowed to work with India and create “win-win”
scenarios for both parties (Muhammad 2012).
 Investment Agreements
Investment agreements have also been a key part of India’s increased involvement with Africa and
other developing countries, and have been key to facilitating overseas agricultural investments by
Indian companies. The important role of investment agreements has been underscored by the
Indian Government’s cooperation with leading business associations such as the Confederation of
Indian Industry’s (CII), the Associated Chambers of Commerce and Industry of India (ASSOCHAM),
the Federation of Indian Chambers of Commerce and Industries (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.
Such groups have been actively engaged with the Indian Government in its efforts to secure new
investment agreements with African and other developing countries. The business associations and
Indian 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 to invest. The groups are all active in lobbying the Indian Government to pursue even further
reforms to trade policy, Exim Bank credits and the rules on outward foreign direct investment in
order to facilitate the overseas acquisitions of agricultural land by Indian companies.
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 (Taraporevala and
Mullen 2013). The investment deals agreed at such business conclaves have increased in value from
US$ 6 billion in 2005 to US$ 64 billion in 2013, deepening the economic engagement between the
two regions (Bhattacharya 2010; Modi 2010). CEOs from major Indian and African companies met in
October 2013 in Johannesburg under the umbrella of 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, create an agreed road map for
future business partnerships, and identify opportunities for collaboration in various sectors.
The main mechanisms being used in recent years are official Bilateral Investment Treaties (BITs),
similar Bilateral Investment Promotion and Protection Agreement (BIPAs), as well as within the
investment chapters of several broader Free Trade Agreements (FTAs). The treaties and agreements
establish strengthened and clarified guarantees for foreign investors’ rights, reductions in tax
burdens for international investors and other streamlining measures to facilitate investment. They
often require host countries to modify their existing laws, which in many cases have historically
regulated foreign investors more strictly than domestic companies. The treaties and agreements are
intended to provide greater assurance to investors that their foreign investments will be guaranteed
fair and equitable treatment in the host countries, as well as full and constant legal security and
dispute resolution through an international mechanism. The number of BITs and BIPAs India has
signed with other countries has increased from 40 in 2000 to 68 in 2010, at which time it when it
was negotiating 24 new ones (Satyanand and Raghavendran 2010).
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The number of Double Taxation Avoidance Agreements (DTAAs) India has signed increased from 69
to 79 over the same period (Satyanand and Raghavendran 2010). While these agreements ostensibly
seek to prevent a foreign investor from being taxed in both jurisdictions, the agreements can also be
exploited by companies from third countries which are investing in either of the two countries party
to a DTAA in an effort to evade taxation through price transferring and other opportunities
presented by DTAAs.
 Exim Bank Lines of Credit
A key policy instrument responsible for facilitating India’s trade and outward foreign direct
investment (FDI) is its Export-Import Bank (Exim Bank), which is a public institution designed to offer
credit and other forms of support to facilitate for trade with India and foreign investment deals for
Indian companies. It extends Lines of Credit (LoCs) to other developing countries as well as to
overseas financial institutions and regional development banks to enable buyers in those countries
to import developmental and infrastructural projects, equipment, goods and services (such as
farming) from India, on deferred credit terms. The soft loans, with an annual interest rate of 1.75
percent, are to be repaid over 20 years and stipulate that 75 percent of goods and services required
for projects be sourced from India (GOI Monitor 2011).
Currently, Exim Bank has in place 86 LoCs, covering over 84 countries in Africa, Asia, Latin America,
Europe and the Commonweath of Independent States (CIS), with credit commitments amounting to
US$ 2.8 billion. Of these, 50 LoCs are to being extended to 39 African countries, amounting to over
US$ 1.75 billion. This makes Africa's share in Exim Bank's LoCs the highest at 63 percent (Dalai 2008).
In one of the largest LoCs offered, India’s Exim Bank gave the Ethiopian government a US$ 640
million LoC to develop the controversial sugar sector in the Lower Omo region. Indian companies are
the largest investors in the country, having acquired more than 600,000 hectares (1.5m acres) of
land for agro-industrial projects (Mittal 2013). Corresponding adjustments to Indian trade policy are
often included in the deals associated with LoCs, in which economic incentives such as duty-free
tariff preference schemes have further encourage private companies to invest in land abroad. For
example, in Ethiopia’s case, its agricultural exports entering Indian markets are now taxed less than
produce from India (PTI 2010).
In addition to concessional LoCs offered to sovereign governments, Exim Bank also extends its own
commercial Lines of Credit (LoCs) to various financial institutions and other entities including
regional development banks such as the East African Development Bank, the ECOWAS Bank for
Investment and Development, and the Eastern and the Southern African Trade and Development
Bank, which is the regional development bank for the COMESA region. India’s Exim Bank has also
participated in providing equity in AfrEximbank, the Development Bank of Zambia, and in the West
Africa Development Bank.
Speaking at the 7th CII-Exim Bank Conclave, India's Commerce Minister, Anand Sharma, said, “While
the current volume of India-Africa trade stands at US$ 45 billion, we have set a target of US$ 70
billion for 2015. I am confident we will achieve that.” The Government of India stated it will facilitate
achieving this goal by extending the number of available Exim Bank LoCs, encouraging Public Sector
Undertakings (PSUs) to enter Africa, and by giving grants and other supporting measures.
At the first India Africa Forum Summit (IAFS) held in India in 2008, attended by representatives of 14
African countries, the Indian government announced it would increase of Lines of Credits (LoCs)
available to African countries from US$ 2 billion to US$ 5.4 billion, offer a new duty-free trade
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preference scheme for least developed countries (LDCs) (a majority of which were African
countries), an expansion of India’s technical assistance programs, and increased Indian support for
African regional initiatives, including a US$ 200 million LoC for the New Partnership for Africa’s
Development (NEPAD) (Taraporevala and Mullen 2013). At the second India Africa Forum Summit,
held in Addis Ababa, Ethiopia in 2011 and attended by 17 African governments, the Indian
Government announced an additional increase of US$ 5 billion in available LoCs for African countries
over the following three years, a new LoC worth US$ 700 million for training facilities, and a US$ 300
million LoC to support the development of an Ethio-Djibouti railway line (Taraporevala and Mullen
2013).
However, some Indian companies interested in taking advantage of these opportunities have
pointed to delays in the release of sanctioned LoCs and the need for a range of improvements in the
mechanisms. For example, at the 9th CII-EXIM Bank Conclave on India-Africa Project Partnership, 1719 March 2013, Indian companies highlighted the need for better monitoring of projects supported
by LoCs, greater transparency in the selection of projects to be supported by LoCs, and improved
synchronisation of different LoC projects that have funding from multiple sources.
Exim Bank also offers financing directly for Indian companies to facilitate their equity participation in
overseas joint ventures (JVs) and wholly-owned subsidiaries (WOS), through its Overseas Investment
Finance (OIF) program. The OIF offers a suite of financing instruments, including: finance for Indian
company’s equity participation; direct finance to the overseas JVs/WOS; finance for acquisition of
overseas business/companies including leveraged buyouts; and direct equity investment. As of
December 31, 2011, Exim Bank has approved credit aggregating to Rs. 240.92 billion for 374
ventures set-up by over 298 companies in 69 countries.
Exim Bank also influences private sector development in Africa through its consultancy and advisory
services to numerous African governments and the World Bank Group, resulting in the participation
of Indian companies in projects financed by the World Bank’s International Finance Corporation (IFC)
under its Africa project development facility, the Africa Enterprise Fund and the Technical Assistance
and Trust Fund in a number of African countries (Rao 2006).
Although the Exim Bank’s LoCs are used for a wide variety of investments, wherever projects involve
agricultural development, Indian foreign investors stand ready to win concessions and contracts for
agricultural development in the form of their foreign direct investment, some of which could
facilitate the “land grabbing” trend. However, the Exim Bank has come under pressure in recent
years in the face of the “land grabbing” controversy and in response has stressed that the majority
of LoCs approved have not been for the agricultural sector. It has claimed to be largely steering clear
of directly financing the foreign land deals of Indian companies (Sethi 2013a). Yet while the number
of overall LoCs offered by Exim Bank may not be for the agricultural sector, an independent analysis
by the Indian Development Cooperation Research (IDCR) found that, when looking at operative LoCs
for the African region during 2011/12, a majority of these were directed towards agriculture and
energy based projects at 36 and 23 percent respectively (Taraporevala and Mullen 2013).
Using foreign aid mechanisms to facilitate its agricultural outsourcing has been one part of a broader
trend by which aid policy and commercial policy are being increasingly intertwined, particularly as
India steps up its role as a foreign aid donor in South-South relations. Such efforts were underscored
by the recent efforts of the Indian Ministry of External Affairs to overhaul its various aid programs
under a new Development Partnership Administration (DPA), a single umbrella for all external
developmental assistance programs that can better manage the formulation, appraisal,
implementation and evaluation of projects more efficiently. According to Mr. P. S. Raghavan, Special
Secretary for DPA in the Ministry of External Affairs, the ministry is exploring innovative models of
12
partnership with Indian industry with the aim of combining development assistance with commercial
goals to create assets that would deliver greater benefits to the African countries (CII-EXIM 2013).
 RBI Reforms to Facilitate Outward FDI
The Indian Government’s efforts to facilitate agricultural outsourcing have also been boosted by
series of broader reforms to India’s Overseas Investment Policy (OIP) over the last decade that have
made it easier for Indian firms to invest abroad, including allowing for approval of ever-bigger deals
and for greater access to overseas financing for such deals (See ANNEX 3 for a comprehensive list of
such reforms). The historical restrictions on overseas Indian corporate investments began being
dismantled with other liberalizing reforms to the Indian economy in the 1990s, but significantly
picked up in the 2000s and have continued.
In 1995, the Government transferred all work related to overseas investment from the Ministry of
Commerce to India’s central bank, the Reserve Bank of India (RBI). As international currency reserves
were built up as a result of increased inward FDI from other countries into India, this made access to
these reserves more available to Indian firms for financing their overseas investments. One
important turning point was a reform in 2000 with the introduction of the Foreign Exchange
Management Act (FEMA), which brought major changes to the historic restrictions on foreign
exchange, particularly those relating to limits on using foreign exchange for financing overseas
investments. FEMA changed the overall policy emphasis from exchange regulation to exchange
management and was designed to facilitate external trade and payments as well as to promote an
orderly development and maintenance of foreign exchange market in India.
However, the RBI remains concerned that if too many of the foreign exchange reserves in India are
used by Indian companies for outward FDI, it could contribute to overall current account deficits for
the Indian economy. Therefore the RBI carefully monitors outflows related to outward FDI by Indian
companies when issuing approvals for deals, and it has become the nodal agency for administering
India’s Overseas Investment Policy.
As opposed to drawing on foreign exchange from within India, the RBI has also liberalized rules on
how much investment capital Indian firms may raise abroad for their overseas investments. For
raising financing outside India, Indian companies have largely used either their overseas locallyincorporated subsidiaries or have set up holding companies and/or special purpose vehicles (SPVs) in
offshore financial centres or other regional financial centres. In 2005, new reforms allowed Indian
companies to float SPVs in international capital markets to finance acquisitions abroad, which
facilitated the use of leveraged buy-outs. Since then, SPVs set up in off-shore financial centres such
as Mauritius, Singapore and the Netherlands, etc., have been widely used as conduits to mobilize
funds and for investments in third countries. Going through such off-shore centres also offers
opportunities for taxation avoidance and easier access to financial resources.
Among one of the most important series of reforms has been a cumulative increase in the size of
overseas deals allowed. In March 2003, the per annum upper limit of US$ 100 million for the
Automatic approval route for overseas investments was eliminated, and Indian firms were allowed
to invest in overseas deals up to of 100 percent of their net worth. This limit was increased to 200
percent of an investor’s net worth in May 2005; to 300 percent in June 2007; and to 400 percent in
September 2007. However, in response to the dramatic fall in the value of the rupee in 2013, and in
an effort to more carefully the monitor the outflow of scarce foreign exchange used in overseas
investment deals, the RBI backtracked and reduced the limit on the size of overseas investments
from 400 percent of the Indian investors’ net worth back down to 100 percent under the Automatic
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approval route. Investments any higher than this amount now need to go through the Prior Approval
route from RBI (PTI 2013).
While India’s overseas investments in developed economies are done mainly through mergers and
acquisitions (M&As), the most common mode of entry by Indian investors into developing
economies is through new, green-field investments. A substantial portion of these investments have
taken place through the SPVs with funding often arranged through overseas banks backed either by
shares or assets of the target company and/or guarantees by the Indian parent. Unlike many other
countries, Indian companies have so far generally not engaged in share swapping as a way of
financing M&As, but have instead generally preferred to use a mix of their retained earnings
(internal source) and borrowings (external source) to finance their overseas acquisitions.
Not only have such reforms better enabled Indian private sector agricultural firms to engage in
agricultural outsourcing, but reforms have also facilitated the role of public sector companies to take
advantage of these opportunities as well. For example, in 2011, the Government of India approved a
policy to support raw material asset purchases made by select public sector undertakings (PSUs)
abroad and under the revised policy, the investment limits were raised for public sector “Navratna”
and “Maharatna” firms.
Navratna was the title given originally to 9 Public Sector Enterprises (PSEs) identified by the Indian
Government in 1997 as “public sector companies that have comparative advantages,” giving them
greater autonomy to compete in the global market so as to “support [them] in their drive to become
global giants” (Khan 2012). The different categorisations of public sector firms (Maharatna,
Navratna, Miniratna-I and Miniratna-II) entitles these public companies to do overseas investments
up to various limits without seeking RBI prior approval.
PSUs in the agriculture, mining, manufacturing and electricity sectors having a three-year record of
making net profits are eligible under the new policy. The Ministry of External Affairs and Indian
missions abroad are associated from the beginning of the process for undertaking a buyout. The
Indian Government is currently evaluating proposals to facilitate acquisition of strategic assets,
particularly in the energy sector, through special investment vehicles (SPVs) or through cash rich
PSUs in the field, and may be developing these for agricultural outsourcing. The Indian Department
of Industrial Policy and Promotion (DIPP) identified South East Asia, Eastern Europe and Africa as
zones where Indian companies would be encouraged to acquire assets as well as buy-out of
companies (Khan 2012).
Among the most recent reforms have been changes in the RBI approval of Indian overseas
investments using new instruments such as multi-layered structures. At one point the government
had recommended banning all multi-tiered structures because of concerns about the lack of full
disclosures, especially regarding corporate guarantees given to secondary and tertiary layers of
entities, and thereby breaching the allowed limits for sizes of overseas investments. However, the
RBI ultimately adopted a policy that will allow the use of certain kinds of clearly defined or specified
'multi-layered' structures, but only through the prior Approval route, not the Automatic route.
 ECGC – Overseas Investment Insurance
India’s efforts at agricultural outsourcing are also facilitated by a public institution which provides an
important array of financial guarantees, risk insurance and other forms of overseas investment
insurance. The Export Credit Guarantee Corporation of India Limited (ECGC) was designed to reduce
the numbers of overseas investments that had failed, and to create more incentives for Indian
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investors to undertake overseas operations. The ECGC is in its 56th year and currently operates with
a core of US$ 3 billion and can take on insurance coverage for up to 10 times that amount.
In 1980, the ECGC introduced the Overseas Investment Insurance (OII) scheme, but it suffered from
relatively high costs and low utilization by Indian companies, but was the first attempt at offering
insurance coverage to overseas investments against political risks including war, expropriation and
foreign exchange repatriation restrictions.
More recently, the ECGC developed an updated scheme known as the Overseas Investment
Guarantee (OIG) in order to provide protection for Indian investments abroad. It provides insurance
coverage for the overseas investments made by Indian companies in approved JVs or WOSs for up to
15-20 years. For an investment in any country to qualify for investment insurance, the OIG prefers
there be a bilateral investment treaty (BIT) between India and the host country for the promotion
and protection of Indian investments.
 New Initiatives Being Considered
Over the last couple of years, the Indian Government has been considering additional reforms and
incentives programs in an effort to explicitly boost further overseas agricultural outsourcing by
Indian agricultural firms. The Indian Ministry of Commerce and Industry has been consulting with the
Ministry of Agriculture and business associations to consider new reforms to India’s Overseas
Investment Policy that could better facilitate outward FDI by Indian agricultural firms, possibly with
new facilities and incentives for Indian investors.
In 2011, it was reported that the Indian Ministries of Agriculture and Commerce were deliberating
over further reforms to India’s Overseas Investment Policy, and officials said that while the policy
would facilitate outward FDI in many sectors, the emphasis of the effort was on agriculture due to
the national food security programme. The reforms are being designed to push production of crops
like pulses and oil seeds where India is deficient, and is based on the recommendation of the prime
ministers’ working group on allowing outward FDI in agriculture, “but in a way that the produce is
exported back to India” (Dey 2011).
At issue is whether India will compulsorily buy back agricultural produce, or if will there be an option
to exercise the right to buy depending on the domestic output and requirement in that particular
commodity. 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 channelizing 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. It is yet to be decided whether the government could set up a revolving fund or play
the role of facilitator in a public private partnership (PPP) mode to boost the initiative” (Dey 2011).
To this effect, the Department of Agriculture is laying a special focus on Africa and South America for
buying or leasing lands and has been holding discussions with the respective embassies in these
regions about legal issues and the degrees of support that countries could provide in this effort.
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. Mr. Basu
15
said that the Ministry asked the Indian Institute of Foreign Trade (IIFT) to conduct a study on
possibilities for such reforms. The Economic Times also quoted another senior government official
who said, “The government may set up a separate cell to facilitate transactions," and in fact, the
ministry “already has plans on the ground to begin cultivation overseas” (Tiwari and Tiwari 2012).
Although the IIFT study was not made publically available, the Ministry of Agriculture’s annual
report, The State of Agriculture 2011-12, discussed the report at length. It stated:
It is the endeavour of the government to keep itself abreast of global trends and
practices in agricultural production, trade and investments. It has taken note of the
efforts being made by China, Japan, Malaysia, South Korea, Libya, Saudi Arabia, UAE
and Egypt to acquire agricultural lands in third countries to augment domestic food
and fuel requirements. It is a fact that a large country like India cannot depend on food
imports to a large extent, especially as the global prices are impacted significantly with
India’s entry. Therefore, with a view to explore the possibility of offshore agriculture
investments for addressing food security and also leveraging the skills of India’s vibrant
agri- entrepreneurs, the Department has entrusted a study to the Indian Institute of
Foreign Trade on ‘Agricultural Outsourcing : Possible Opportunities for India’ (State of
Indian Agriculture 2011-12).
The main recommendations made in the IIFT report include:


That India should enter into bilateral framework agreements with countries which are
willing to facilitate Indian investments, formulate Responsible Investment Principles on
the basis of international norms, in consultation with investors, co-ordinate
interventions of the Government of India under the India- Africa Framework for
Cooperation and private investments by Indian entities in Africa to maximize the
impact, and have a special focus on Latin America, where our Missions and the host
countries are eager that India should take the initiative in this regard. A supportive
policy will encourage Indian entrepreneurs to obtain the desired results.
That the Ministry of Agriculture will need to play a nodal role in the initiative, in
coordination with relevant Ministries and Agencies like the MEA, Ministry of Finance,
Ministry of Commerce and Industry, Reserve Bank of India, EXIM Bank, etc. The
provisions contained in the MoUs and Agreements are operationalised through
drawing biennial Work Plans. There are more than 50 countries with which India has
signed MoUs and Agreements and Work Plans for agricultural cooperation (State of
Indian Agriculture 2011-12).
And although the IIFT report is not publically available, the IIFT website offers a detailed description
of the study when describing its recent research initiatives in its IIFT 48th Annual Report 2011-12:
The Study was conducted for Department of Agriculture & Cooperation, Horticulture
Division, Ministry of Agriculture. The Study aims to examine all relevant aspects,
including the strategic dimension, to enable the Ministry of Agriculture to design an
appropriate policy framework. The following Terms of Reference (TOR) were designed
to assess the Study:


Examine the likely demand-supply gap in India over the next 10 years in important
food crops, taking into account various scenarios.
Assess the situation of international trade in the identified crops with the objective of
considering whether India’s requirements can be met in a secure and stable manner
through imports.
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







Prepare an overview of availability of surplus agricultural lands on offer in various parts
of the world, especially in Central Asia, Africa and Latin America and their suitability for
addressing India’s needs.
Examine if countries in Africa with surplus arable lands but which themselves are facing
food shortages, which require a different approach. What should be the objectives of
possible Indian interventions in such countries?
List the potential countries for agricultural outsourcing (AO) initiatives based on
various criteria like economic feasibility, political sensitivity, investment friendliness,
social compatibility, etc.
Explain the role the Government should play in facilitating AO. In this connection, also
examine the need for, and the nature of, intergovernmental arrangements to anchor
such initiatives.
Chalk out the possible initiatives to be taken by Government to encourage responsible
and capable Indian business entities to invest in AO.
Examine the legal, commercial and trade policy issues involved in possible
arrangements for exporting the products of AO into India.
Find out possible Health and Safety issues associated with AO, including Seed Laws,
GM Crops, etc.
In the light of the above, make recommendations regarding the role the Ministry of
Agriculture will need to play once the policy framework for AO is in place. This will
include administrative arrangements to be put in place in India and abroad.
IV. Political Responses to Land-Grabbing
 Some Host Countries Place New Restrictions on Agricultural
Investments
Faced with increased reports of “land grabbing” by Indian and other foreign companies, some
African countries have responded to the criticisms. For example, after several years of enabling
foreign firms to grab vast stretches of land, the Ethiopian Government has begun to review its land
policy. Recently, it announced that it will limit the amount of land allocated to any potential foreign
investor to 5,000 hectares and will give priority to local investors, although in this case the land
conceded by the state would be limited to a maximum of 3,000 hectares (AI 2013).
Tanzania has also taken recent steps towards dramatically curbing agricultural investments by
restricting the size of land that single large-scale foreign and local investors can lease for agricultural
use. The permanent secretary in the prime minister's office, Peniel Lyimo, confirmed that for a largescale investor in sugar production, the ceiling has been put at 10,000 hectares; the limit for rice
production is 5,000 hectares, and within a seven-year period, an investor would not be able to lease
more than 10,000 hectares” (Kiishweko 2012).
In addition to being hit was accusations of “land grabbing”, many host country governments have
also been disappointed by the behaviour of some land investors which are engaging in “land
banking,” i.e., when investors purchase huge chunks of land on the promise to bring them into
production but then actually leave them unattended for years so they can re-sell them later for a
higher price.
For example, in 2008, the Indian company, Karuturi Global, made international headlines when it
leased 300,000 hectares (ha) of land in southern Ethiopia with the stated aim of becoming the
17
world’s largest food producer. 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. “I have to be frank, they didn’t meet our expectations,”
said Ethiopia’s Minister of Agriculture, Tefera Derbew, “We would like to get the land developed in a
short period of time… [but] Karuturi, Saudi Star and the like, their implementation is not to our
satisfaction.” For the failure to scale-up production as promised, Ethiopia reportedly reduced the
size of Karuturi’s lease from an historic 300,000 hectares to 100,000 hectares (Sethi 2013a).
Many other governments have followed suit in the last couple of years. For example, in Brazil, where
China’s recent efforts to buy land have made officials nervous, Brazil’s attorney general Luís Inácio
Adams reinterpreted a 1971 law that now makes it significantly harder for foreigners to buy land in
Brazil. And in Argentina, President Cristina Fernández de Kirchner has sent a similar law to Congress
that would limit the size and concentration of rural land foreigners could own. Other countries which
have also tried to introduce controls on large-scale land deals in recent years, including Democratic
Republic of Congo, Mozambique, Tanzania, Indonesia, Papua New Guinea, Colombia, Uruguay,
Australia and New Zealand in Asia; and the Democratic Republic of Congo in Africa (UNCTAD 2012;
Kende-Robb 2012). (See ANNEX 4 for a list of recent state restrictions on foreign investors getting
access farmland).
These developments have given some degree of concern for India’s Exim Bank and its support for
the agricultural outsourcing initiative. The Hindu reported on four separate instances in Ethiopia,
involving an estimated 365,000 hectares of land, in which companies have either seen their land
allocations dramatically reduced — as in the case of Karuturi Global — or cancelled altogether as in
the case of slain liquor baron, Ponty Chadha’s Chadha Group (100,000 hectares); Emami Biotech
(40,000 hectares); and CLC Industries Plc (25,000 hectares) (Sethi 2013a).
The Chairman and Managing Director of India’s Exim Bank, T.C.A. Ranganathan, said experience
gained from agriculture lending in India was not applicable in Africa, as very few Indian companies
had established track records in developing lands on the scale seen across the African continent. He
told The Hindu, “The infrastructure to handle agriculture needs to be well in position and you can’t
do a…large operation without enough control processes and systems in place,” said Mr.
Ranganathan, “We don’t have enough companies in India who have those pre-existing credit
histories of such large agriculture operations” (Sethi 2013b).
Ranganathan also noted that few African countries (barring exceptions in southern Africa) had
histories of large-scale agriculture, suggesting that investors were still learning how to implement
such projects. “Agriculture has never been a major activity,” he said. “There would be some
unknown tripwires that prevent large scale agricultural activities. We want companies borrowing
from us to be absolutely sure they are doing the right things.” (Sethi 2013b).
This string of newly-enacted restrictions on foreign investments in some developing countries is also
noteworthy because it goes directly against the standard doctrines of the Washington Consensus
policies and free market policies promoted by Western governments, the International Monetary
Fund (IMF) World Bank loan conditions and World Trade Organization (WTO) rules over the last few
decades. And the new restrictions may well conflict with many proposed regional and bilateral free
trade agreements (FTAs) and bilateral investment treaties (BITs) which are based on the notion of
“national treatment” and “non-discrimination” – the idea that foreign investors should be treated
the same as nationals, with no discrimination in favour of domestic companies allowed.
These developments suggest the collective power of organized national and international civic
engagement and advocacy against “land grabbing” in recent years is beginning to have an impact.
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 Advocacy Against “Land Grabbing”
Critics of the “land grabbing” trend have included national and international coalitions of smaller
farmers’ associations, human rights and other advocacy organisations, as well as academics and
research institutes. They point to the negative consequences of such a trend, including the impacts
on local peoples on the ground, who are often displaced in the process, as well as other negative
ethical, political, human rights and environmental consequences for the people and host countries
involved in such investments.
The critics of “land grabbing” also point to the unsustainable nature of the corporate model of largescale monoculture production that Indian companies and other investors often import into
developing countries. Instead, they point to the emerging international scientific consensus on the
sustainability and output productivity of alternative, smaller-scale, agro-ecological approaches. The
most comprehensive international collaborative research on these issues was done by the
International Assessment of Agricultural Knowledge, Science and Technology for Development
(IAASTD), which confirmed that, contrary to popular misconceptions and claims by global agricultural
companies, there is in fact a well established inverse relation between size and productivity, in which
yields per hectare are actually generally higher on smaller farms (Worldwatch 2011; Meinzen-Dick
and Markelova 2009; Ong’wen and Wright 2007).
Many scientists who have studied the issue as well as farmers’ and indigenous peoples’
organisations, social movements and civil society groups largely agree that what is needed are
policies and regulations to stop the land grabbing and ensure steps are taken to protect the land
rights and enhance the productive efficiency of small farmers:
• Keep land in the hands of local communities and implement genuine agrarian reform
in order to ensure equitable access to land and natural resources;
• Heavily support agro-ecological peasant, smallholder farming, fishing and
pastoralism, including participatory research and training programs so that small-scale
food providers can produce ample, healthy and safe food for everybody;
• Overhaul farm and trade liberalisation policies to embrace food sovereignty and
support local and regional markets that people can participate in and benefit from;
• Promote community-oriented food and farming systems hinged on local people's
control over land, water and biodiversity;
• Enforce strict mandatory regulations that curb the access of corporations and other
powerful actors (state and private) to agricultural, coastal and grazing lands, forests,
and wetlands;
•Halting the expansion of industrial corporate led agriculture and ensure food
sovereignty - peoples’ right to control their own seeds, lands, water and food
production through just and ecological systems; which ensures enough, diverse,
nutritious, locally produced and culturally appropriate food for all wetlands (NGOs
2010: Ndikumana 2013; Oxfam 2011).
There are many examples of sustainable food systems around the world, including smallholder farms
like Latin America’s Campesino a Campesino Movement, which promotes agro-ecological methods
that increase yields, conserve soil, water, and biodiversity and capture carbon to cool the planet.
Under such techniques, urban farms from Havana to Bangkok are steadily increasing food
production and improving livelihoods. Community-supported agriculture (CSA) groups around the
world provide fresh, healthy food for members while supporting a local base of small farmers.
Hundreds of municipal Food Policy Councils and Food Hubs are implementing citizen-driven
initiatives to keep the food dollar in the community where it can recycle up to five times, thereby
19
creating jobs and kick-starting local economic development. Each of these efforts are grounded in
sustainable, equitable and dignified livelihoods that make a food system sustainable (Holt-Giménez
2013).
Advocates of agroecologically-managed smallholder farms and critics of “land grabbing” share a
common recognition that hunger, poverty, and climate change are inter-related through the
medium of agricultural policies. Together they are working to distribute the evidence presented by
the IAASTD’s research on best practices and build support for agroecological methods and against
the global corporate model of commercial, high-input farming introduced by foreign investors, which
uses biotechnology, genetic engineering and pesticides and herbicides to meet short-term
commercial market objectives (Goswami 2011).
In response to growing concerns about the “land grabbing” trend, in 2009 the United Nations Food
and Agricultural Organization (FAO) joined with the World Bank, the International Fund for
Agricultural Development (IFAD) and the United Nations Conference on Trade and Development
(UNCTAD) to draft the Responsible Agricultural Investment (RAI) principles, a set of best practices
and principles that foreign investors can pledge to adhere to in order to make such investments a
“win-win” situation for all parties concerned.
However the RAI principles have been widely criticised by activists and scholars as an insufficient
response that can actually result in legitimising a process many feel is rife with exploitation and
rights abuses. Critics say the fact that the principles are only voluntary falls far short of actual laws
and strict regulations that could be enforced. This led some 130 organisations and networks from
across the world, many small farmers’ associations and community organisations, to issue a
statement in April 2010 denouncing the RAI principles as a move to try to legitimise land grabbing
and noting that taking over of rural people's farmlands is completely unacceptable no matter which
guidelines are followed (NGOs 2010).
By January 2012, the criticisms and limitations of the RAI principles compelled the Pan-African
Parliament to go farther and call for an outright moratorium on new large-scale land investments
“pending implementation of land policies and guidelines on good land governance.” The resolution
recognized the importance of investment to Africa’s development, but stated the Parliament is:
“Cognizant of the need of investing in Africa’s development in particularly in
agriculture and in rural areas where the majority of people live; Noting with deep
concern the recent rise of large-scale land acquisitions also known as ‘land grabbing’
and the impact of domestic and Foreign Direct Investment in land, water and related
natural resources; Fully alarmed by the negative impacts on human rights especially on
women, including unequal access to land and disruption of access to water...‟ (PanAfrican Parliament 2012).
Later in 2012, Kofi Annan and other members of the Africa Progress Panel Report similarly called on
African governments to “carefully assess large-scale land deals and consider a moratorium pending
legislation to protect smallholder farmers and communities‟ (Kende-Robb 2012).
In May 2012, the Committee on World Food Security (CFS), a United Nations-led group that includes
governments, business and importantly -- civil society representatives -- laid the groundwork for a
governance structure for food by endorsing international voluntary guidelines on the responsible
governance of tenure of land, fisheries and forests (Tran 2012). But the guidelines took years to
negotiate and like the RAI principles, they lack an effective enforcement mechanism because they
are voluntary. Social movements and CSOs engaged in the CFS are seeking to get the Voluntary
Guidelines translated into binding national laws, while corporations want them to remain voluntary.
20
Critics of “land grabbing” are unhappy with the CFS guidelines for the same reasons they opposed
the RAI principles – because they do not try to stop land grabbing, but instead articulate how such
deals “should” be pursued to cause the least damage.
Olivier De Schutter, the UN special rapporteur on the right to food, acknowledged the importance of
the CFS voluntary guidelines, but said the lack of an effective enforcement mechanism neglects the
political reality of poor governance on the ground in many countries in sub-Sahran Africa or southeast Asia. In cases where governance is poor, De Schutter suggested a role for international action:
The international community should accept it has a role in monitoring whether the
rights of land users, as stipulated in the guidelines, are effectively respected. Since
there is no ‘sheriff’ at global level to achieve this, at the very least, the home states of
investors should exercise due diligence in ensuring that private investors over which
they can exercise control fully respect the rights of land users. Export credit agencies,
for example, should make their support conditional upon full compliance with the
guidelines, and in the future, the rights of investors under investment treaties should
be made conditional upon the investors acting in accordance with the guidelines (Tran
2012).
During 2013, the CFS has been hosting another consultation process on “responsible agricultural
investment” (BBC 2012). Civil society groups participating in it have demanded that the discussion
focus on "rai" with small letters as opposed to “RAI” in capital letters in order to disassociate it with
the World Bank's seven RAI principles. Civil society groups are seeking to stress the need for scaled
up investment in small scale farmers and food producers.
But whereas the RAI principles, the CSF and other efforts at international voluntary guidelines keep
the focus on the activities of foreign investors, many other international advocates are instead
putting the focus on better governance by host counties. They are calling on host country
governments to ensure consideration of alternative models of land management which are socially
inclusive and non-discriminatory, to ensure that land deals are negotiated in a proper and
transparent manner, with “free, prior and informed consultation and consent” as well as adequate
compensation and restoration of livelihoods. Host country states are also being called on to make
available appropriate procedures for land registration, community engagement, compensation and
mechanisms to redress land disputes.
The politically sensitive issue of the land rights of local communities goes beyond policies on
agricultural development, but is part of a much broader unfinished governance agenda in Africa and
elsewhere. Therefore, many advocates call for a more transparent governance framework on
property relations that protects the land rights of local communities as an essential precondition for
attracting FDI into the agricultural sector. This would entail the development of policies that
delineate the roles and responsibilities of the state, small farmers and domestic and foreign capital
in a consultative and transparent way – things that voluntary guidelines on FDI in cannot do (Cheru
and Modi 2013).
One of the major problems with “land grabbing” has been the failure of host country governments
to take decisions on land leases in the context of any broader, long-term national strategy on rural
development. A necessary precondition for monitoring compliance by foreign and domestic
investors and for evaluating their overall contribution to the transformation of agriculture in
developing countries is a strong and nationally owned institutional framework that can effectively
regulate FDI in terms of ensuring technology transfer, skills development, asset creation and
compliance with international labour and environmental standards.
21
However, many developing countries lack the technical and human resources to adequately monitor
and regulate large-scale agricultural projects, underscoring the need for greater public investment in
these areas by states, and for great civic engagement in participatory processes and oversight. As
advocates have shown in many cases, having an actively engaged civil society and domestic media is
indispensable in holding national governments accountable so that the benefits of international
investments are channelled to strengthen the productivity of small-scale farmers, and promote
value addition through technology transfer and innovation (Cheru and Modi 2013).
Although cases of “land grabbing” have led to serious abuses and environmental harm, not all land
deals lead to the dispossession and destruction of the livelihoods of local communities. If
undertaken with proper due diligence and civic engagement, large-scale land investments can create
opportunities in food-deficit African countries. Such investments could improve the local
infrastructure and economy, ensure technology transfers, provide long-term employment,
encourage asset creation, expand opportunities for non-farm employment by diversifying the rural
economy, and improve competitiveness and economic transformation – all of which are critical to a
successful agrarian revolution in Africa and elsewhere. Therefore, under appropriately regulated
conditions and with active civic engagement, certain types of FDI into the agricultural sector in
developing countries can be supportive, as long as they are undertaken within the context of a longterm national development vision (Cheru and Modi 2013).
V. References
AI (2013) “Ethiopia: Land policy revised,” Africa Intelligence, 27 September.
BBC (2012) “FAO: levelling off the playing field,” BBC World Service, 23 March.
Cheru, F. and Modi, R. (2013) “Introduction: peasants, the state and foreign direct investment in
African agriculture,” in Cheru, F. and Modi, R., Agricultural Development and Food Security in Africa,
London Zed Books, 2013.
Chopra, S. (2010) “Agricultural Outsourcing: Possibility, Prospects and Policy Options for India,”
SanjeevChopra.in, 27 September.
Chopra, S. (2011) “Policy Options on Agricultural Outsourcing,” SanjeevChopra.in, 28 November.
CII (2013) “The India-Africa: South-South Trade and Investment for Development,” Prepared by the
International Division of the Confederation of Indian Industry (CII) in close collaboration with the
Development Division of the World Trade Organization (WTO), New Delhi, July 2013.
CII-EXIM (2013) “9th CII-EXIM Bank Conclave on India-Africa Project Partnership,” 17-19 March.
Corpuz, G.A. (2013) “Landgrabbing by multinational firms prevalent in underdeveloped countries –
foreign activists,” Bulatlat.com, 27 July.
Dalai, P. (2008) “Exim Bank’s LOCs Spur Africa’s Economic Growth,” Indo-African Business Quarterly,
November 2007-January 2008.
Dey, A. (2011) “Ministries deliberate over overseas direct investment policy, The Business Standard,
12 June.
22
Ferrnando, T. (2013) “BRICS grab African land and sovereignty,” Pambazuka News, 28 March.
GOI Monitor (2011) “Land grab in Africa, brought to you by India,” GOI Monitor Desk, 13 December.
Goswami, R. (2010) “African landrush,” Infochange News & Features, 5 April.
Goswami, R. (2011) “In field and for food, the return of structural adjustment,” Fahamu, 2 March.
GRAIN (2012) “Squeezing Africa dry: behind every land grab is a water grab,” GRAIN, 11 June.
GRAIN (2013) “Land grabbing for biofuels must stop,” GRAIN, 21 February.
Hoffstatter S. (2009) “Government drive to set up white SA farmers in Africa,” Business Day, 12
October.
Holt-Giménez, E. (2013) “Sustainable Food Systems for Security and Nutrition: The Need for Social
Movements,” CIP Americas Program, 16 October.
IANS (2011) “Indian puts food security at heart of Africa agenda,” IANS, 10 January.
(GF) (T) Mumbai, Jan 10 (IANS)
Kende-Robb, C. (2012) “Africa Progress Report 2012 - Jobs, Justice and Equity: Seizing Opportunities
in Times of Global Change,” Africa Progress Panel, Geneva.
Khan, H.R. (2012) “Outward Indian FDI – Recent Trends & Emerging Issues,” Address delivered by
Shri. Harun R Khan, Deputy Governor, Reserve Bank of India at the Bombay Chamber of Commerce
& Industry, Mumbai on 2 March.
Kiishweko, O. (2012) “Tanzania takes major step towards curbing land 'grabs',” The Guardian, 21
December.
Land Matrix (2012) The Land Matrix is a global and independent land monitoring initiative,
www.landmatrix.org
Madan, T. (2006) “India,” Energy Security Series, Brookings Foreign Policy Series, November.
Meinzen-Dick, R. and Markelova, H. (2009) “Necessary Nuance: Toward a Code of Conduct in Foreign
Land Deals,” in Kugelman, M. and Levenstein, S.L., eds., Land Grab? The Race for the World’s
Farmland, Washington DC: Woodrow Wilson International Center for Scholars.
Mawdsley, E. and McCann, G., eds. (2010) India in Africa: Changing Geographies of Power, London:
Pambazuka Press.
McKinsey & Company (2012) “Transforming water economies,” by Giulio Boccaletti, Sudeep Maitra
and Martin Stuchtey, McKinsey & Company.
Mittal, A. (2013) “Indian land grabs in Ethiopia show dark side of south-south co-operation,” | The
Guardian, 25 February.
23
MoE (2009) “Monitoramento do Desmatamento no Bioma Cerrado 2002-2008: dados revisados’
(“Monitoring the Deforestation in the Cerrado Ecosystem 2002-2008: Revised Data”), Ministry of the
Environment, Brasilia: MMA/IBAMA.
Muhammad, H. (2012) “India: 900m Hectares of Arable Land Wasted in Africa”
indiacurrentaffairs.org, 19 March.
NASA (2009) “NASA Satellites Unlock Secret to Northern India's Vanishing Water,” The National
Aeronautics and Space Administration, Washington DC. 12 August.
Ndikumana, L. (2013) “Agriculture for Africa’s Development: In Search for a Champion,”
TripleCrisis.com, 27 February.
NGOs (2010) “Stop land grabbing now!” A public statement led by La Via Campesina, FIAN, Land
Research Action Network, GRAIN and signed by several dozen other organisations, 22 April.
Oakland Institute and Polaris Institute (2011) “Land Grabs Leave Africa Thirsty,” December.
Ong’wen, O. and Wright, S. (2007) “Small Farmers and the Future of Sustainable Agriculture,”
EcoFair Trade Dialogue Discussion Paper No. 7, Heinrich Boell Stiftung, Misereor and Wuppertal
Institute for Climate, Environment and Energy, March.
Oxfam (2011) “Land and Power The growing scandal surrounding the new wave of investments in
land,” Oxfam International, 22 September.
Pan-African Parliament (2012), Sixth Ordinary Session of the Pan-African Parliament, Addis Ababa,
Ethiopia, 16-20 January.
Patnaik, B. (2010) “The new shifting agriculture: Shopping for fields overseas,” Times of India, 9 July.
PTI (2010) “Punjab farmers to acquire 50,000 hectares of land in Ethiopia,” Press Trust of India (PTI),
17 September.
PTI (2013) “India, S. Africa to discuss food security, trade issues,” Press Trust of India (PTI), 29
September.
Rao, S.R. (2006) “Exim Bank: partnership in Africa’s development,” Presentation made at the
Organisation for Economic Cooperation and Development (OECD), Paris, 16–17.
Rowden, R. (2011) “India’s Role in the New Global Farmland Grab: An Examination of the Role
of the Indian Government and Indian Companies Engaged in Overseas Agricultural Land Acquisitions
in Developing Countries,” Produced in collaboration with GRAIN and the Economics Research
Foundation, New Delhi, August.
Sethi, A. (2013a) “Karuturi Debacle Prompts Ethiopia to Review Land Policy,” TesfaNews.com, 1
June.
Sethi, A. (2013b) “Exim bank wary of lending as Indian land deals in Africa falter,” The Hindu, 14 July.
Sharma, D. and Mahajan, D. (2007) “Energising ties: the politics of oil,” South African Journal of
International Affairs, vol. 14, no. 2, pp. 37–52.
24
State of Indian Agriculture (2011-12), Annual Report of the Ministry of Agriculture, Government of
India, New Delhi.
State of Indian Agriculture (2012-13), Annual Report of the Ministry of Agriculture, Government of
India, New Delhi.
Subramaniam, G. (2008) “Govt, India Inc plan to farm land abroad,” The Economic Times, 3
September.
Taraporevala, P. and Mullen, R.D. (2013) “India-Africa Brief: Courting Africa through Economic
Diplomacy,” Indian Development Cooperation Research, New Delhi, 5 August.
Thaler, K. (2013) “Brazil, biofuels and food security in Mozambique,” in Cheru, F. and Modi, R. eds.,
Agricultural Development and Food Security in Africa, London: Zed Books.
Tiwari, D. and Tiwari, R. (2012) “Government mulls private purchase of farm land abroad,” The
Economic Times, 5 March.
Tran, M. (2012) “Land deals in Africa have led to a wild west – bring on the sheriff, says FAO,” The
Guardian, 29 October.
Satyanand, P.N. and Raghavendran, P. (2010) “Outward FDI from India and its policy context,”
Columbia FDI Profiles, Vale Columbia Center on Sustainable International Investment, 22 September.
UNCTAD (2008) “Recent Developments in International Investment Agreements 2007-June 2008,”
IIA Monitor, No. 2.
UNCTAD (2011-12) World Investment Report, United Nations Conference on Trade and
Development, Geneva, 2012.
Worldwatch (2011) “Land Grabs” in Agriculture: Fairer Deals Needed to Ensure Opportunity for
Locals,” Worldwatch Institute, 26 July.
25
ANNEX 1. Examples Indian Companies Investing in Agricultural
Land Overseas
Indian Company
Karuturi Ago
Products Plc.
Country
Ethiopia
Details
Acquired 100,000 ha in the Jikao and Itang Districts of the Gambela Region for
growing palm, cereal and pulses, with conditional option to acquire another
200,000 ha. Karuturi Ago Products is a subsidiary of Karuturi Global Ltd.
2.
Ruchi Soya
Industries
Ethiopia
Acquired 25-years lease for soyabean and processing unit on 152,649 ha in
Gambela and Benishangul Gumaz States.
3.
KS Oils
Indonesia
Acquired 130,965 ha at Kalimantan for palm plantation; This is the third tranche of
land acquired by the company after it previously acquired 210,039 ha in two deals
in 2008 and 2009.
4.
Verdanta Harvests
Plc.
Ethiopia
Acquired a 50-years lease for 5,000 ha in the Gambela region for a tea and spice
plantation.
5.
Chadha Agro Plc
Ethiopia
Acquired up to 100,000 ha in Guji Zone in Oromia Regional State for a sugar
development project.
6
Sterling Group
Argentina
Purchased a 2,000-hectare olive farm and another 17,000 ha for growing peanuts.
7.
Olam International
Argentina, Gabon,
Uruguay
Acquired 17,000 ha in Argentina to grow peanuts, 300,00 ha in Gabon for palm oil
and 16,000 ha in Uruguay for dairy farming. Olam is a Non-Resident Indian firm
based in Singapore.
Mozambique
Olam International is also developing an outgrower scheme on a giant 20-year,
850,000 hectare concession it has secured not far from the port of Beira,
Mozambique.
1.
8.
Varun International
Madagascar
Subsidary Varun Agriculture Sarl leased or purchased 232,000 ha to grow rice, corn
and pulses.
9.
Solvent Extractors
Associations of
India
Latin America
(Uruguay, Paraguay)
A consortium of 18 vegetable oil companies was set up to acquire lands in Latin
America to grow soyabean and sunflower.
10.
Uttam Sucrotech
Ethiopia
Won a US$ 100-million contract to expand the Wonji-Shoa sugar factory.
11.
Shree Renuka
Sugars
Brazil
Purchased sugar and ethanol producer Vale Do Ivai S.A. Acucar E Alcool in
November 2009 for US$ 240 million, including its 18,000 ha of land for sugarcane;
and acquired a 51-percent stake in Equipav SA Acucar e Alcool fr US$ 329 million
that owns two sugar mills and has 115,000 ha of cane growing land in southeastern Brazil.
12.
McLeod Russel
India
Uganda
Purchased tea plantations worth US$ 25 million, including Uganda’s Rwenzori Tea
Investments; McLeod Russel India is owned by BM Khaitan.
13.
ACIL Cotton
Industries
Brazil, Congo and
Ethiopia
Plans to invest nearly US$ 15 million (Rs 68 crore) for land leases to start contract
farming pulses and coffee in Brazil, Congo and Ethiopia.
14.
MMTC Ltd
(state-owned)
Kenya and Tanzania
Plans to (as of Oct 2010) grow pulses.
15
Adani Group
Africa, Brazil,
Argentina, Indonesia
and Malaysia
Plans to (as of Oct 2010) set up farms to cultivate edible oil and pulses
16
Neha International
Ethiopia
Leased land in the Oromia region — in Holetta for floriculture and near Bako for
rice, maize, oilseeds and pulses.
17
Sannati Agro Farm
Enterprise Pvt. Ltd.
Ethiopia
Acquired a 25-years lease on 10,000 ha in Dimi District, Gambela Region, for the
cultivation of rice, pulses, and cereals.
18
Jay Shree Tea &
Industries
Rwanda, Uganda
Acquired two tea plantations in Rwanda and one in Uganda; Jay Shree Tea &
Industries is controlled by BK Birla.
19
BHO Bio Products
Plc.
Ethiopia
Acquired 27,000 ha to grow cereal, pulses and edible oil crops.
26
20
ACIL Cotton
Industries
Brazil, Congo and
Ethiopia.
Announced plans in January 2011 to invest nearly US$ 15 million (Rs 68 crore) to
start contract farming of crops like pulses and coffee in Brazil, Congo and Ethiopia.
21
Indian State of
Andhra Pradesh
Kenya and Uganda
AP signed preliminary deals with Kenya and Uganda to send 500 farmers to
cultivate 20,234 hectares in Kenya and 8,000 hectares in Uganda in which the
Indian farmers would work as entrepreneurs and landowners, not as labourers.
22
CLC Industries
Ethiopia
CLC Industries, a subsidiary of Indian textile major CLC Enterprises, is the latest
company to withdraw from Ethiopia after promising to invest US$ 100 million in a
25,000 ha cotton farm and spinning plant in 2011. In late 2012, the government
terminated the company’s lease, claiming CLC had not fulfilled its contractual
obligations.
23
Karuturi Ago
Products Plc.
Kenya
Karuturi’s flower operations near Lake Naivasha in Kenya came under criticism
when 3,000 workers went on strike to protest poor working conditions, along with
concerns about the environmental impact around Lake Naivasha, a wetland of
international importance.
24
Siiva Group
Liberia, DRC,
Cameroon, Sierra
Leone, Ivory Coast
Chennai-headquartered Siva Group, registered in the off-shore centre of Singapore,
has a 50 percent share in a 170,000 hectare palm oil plantation in Liberia, shares in
palm oil and soybean production in the Democratic Republic of the Congo (DRC),
200,000 hectares in Cameroon and at least 100,000 hectares in Sierra Leone, as
well as in Ivory Coast.
25
Shapoorji Pallonji &
Co
Ethiopia
Leased 50,000 hectares and is likely to consider its foray into agriculture in the
coming years.
26
Tata Group
Uganda
Tata Group has land leased to run a pilot agricultural project.
27
Jaipurias of RJ Corp.
Uganda, Kenya and
beyond
Jaipurias of RJ Corp. leased 50-acre model dairy farm to expand its presence from
Uganda and Kenya and tap other countries of Africa to market its range of milk byproducts.
28
Jay Shree Tea &
Industries
Rwanda, Uganda
B K Birla's Jay Shree Tea & Industries bought three tea gardens.
29
Natural Sugar and
Allied Industries
Mozambique
NSAI, a private mill in Marathwada, was lead 10,000 hectares by Mozambique to
set up a sugar mill in 2011-12.
30
Shapoorji Pallonji
Ethiopia
Shapoorji Pallonji, an industrial conglomerate with a large stake in the Tata group,
is believed to be the only group to have obtained part financing from the Exim bank
for a 50,000-hectare bio-fuel project in the Benshangul Gumuz region in western
Ethiopia.
Source: Rowden (2011) and various published news reports.
ANNEX 2. Land Grabbing in a South-South Context
The significant increase in South-South economic relations and the rise of the BRICS (Brazil, Russia, India, China and South Africa) is often
portrayed as a potentially progressive alternative to traditional North-South relations, and Africa’s increased trade and investment by
China and India and to a lesser extent Brazil, has indeed offered African countries with access to cheaper imports, new markets for their
exports, and development assistance without traditional strings attached by western donors. In this sense, the rise of the BRICS and SouthSouth relations has afforded African countries a new greater degree of flexibility as the relative influence of traditional western countries
has diminished.
Regarding India-Africa relations, it is important to note that India has had an historic presence in Africa dating back to the pre-colonial
period and early Indian Ocean trade routes. The relationship became stronger during the period of anti-colonial struggle and later, at the
height of the Cold War, when India, under the leadership of Jawaharlal Nehru, took an instrumental role in the establishment of the NonAligned Movement (NAM) to demand for a more just international economic order in North-South relations. The principle of nonalignment and South–South cooperation became the centrepiece of Indian foreign policy until the late 1980s.
Today, in the context of deepening South-South economic relations, each of the leading BRICS in the South can offer African countries
something more helpful than traditional western investors: China can offer support in large infrastructure development in a developing
country context; Brazil can offer help with programs directed at strengthening small farmers; And India can offer Africa more appropriate
types of cost effective and intermediate technology in the fields of information technology, agriculture, health and pharmaceuticals that
are also more appropriate for developing country contexts than FDI by traditional western companies. And unlike the predominantly
state-driven approach of China and its large public companies, India’s recent FDI into Africa has been largely pushed by large, medium and
27
even small private sector companies such as telecommunications, agriculture, hotels, mining, rail and road infrastructure and
pharmaceuticals firms who can more easily in engage with Africa’s many small and medium-sized enterprises (SMEs).
However, despite the benefits provided to Africa by the new South-South economic relations today, the recent trade and investment data
offer a somewhat less idealistic picture. On the African continent, India and China are competing with each other in their respective quests
for oil, markets, minerals, raw materials and influence. In many ways their investors behave in a similar fashion as traditional Northern
investors, though their investments are presented in terms of a progressive, alternative South-South solidarity. For example, as discussed
above, the dramatic increase in bilateral investment treaties (BITs) signed by countries in recent years often seek to enhance the rights of
foreign investors over the public interest, and the South-South BITs are very much a part of this trend. The number of BITs signed rose
from over 400 in 1991 to 2,600 by mid-2008, while BIT-like provisions have been written into a growing number of broader free trade
agreements (FTAs) (Ferrnando 2013; MoE 2009). By 2004, South-South BITs accounted for 28 per cent of the total number of BITs signed
(Ferrnando; UNCTAD 2008). China has concluded BITs with developing and LICs countries (Chad, Costa Rica, Cuba, Republic of Korea, Cote
d’Ivoire, Gabon, Seychelles, Laos, Libya, Mali, Myanmar/Burma, Madagascar, Ethiopia, Uganda, etc.). 60 percent of the BITs concluded by
China between 2002 and 2007 were with developing countries, mainly African. South Africa too has been extremely active in signing BITs
since the end of the apartheid era, as it reorients its international relations according to the economic needs of national investors. As a
consequence of the intra-regional expansion of South African investments, the government has BIT-type agreements on the promotion
and reciprocal protection of investment (plus related protocols) with Angola, Cameroon, Democratic Republic of the Congo (DCR), Gabon,
Guinea, Ethiopia, Mauritania, Namibia, Sudan, Tanzania, Zambia and Zimbabwe (Ferrnando 2013).
The BITs increasingly being signed between the BRICS and other smaller developing countries suggests a strongly pro-investor agenda
dominates in South-South priorities, despite the otherwise progressive sounding rhetoric of the BRICS. Rather than acting as new
institutional and legal spaces for testing new rules, or constructing an alternative parallel network of bilateral agreements based on new
principles and new relationships between investors and states, many of the recent South-South BITs seem to be reproducing the same
logic and, in some cases, the same wording as North-South BITs (Ferrnando 2013).
Although not on the same scale as China’s, the Indian economy has grown rapidly from the 1990s, and securing future access to supplies
of cheap energy and other strategic raw materials from the African continent on a long-term basis has become an economic and political
imperative in India’s recently stepped-up relations with Africa. Because India itself has very little oil, it is increasingly dependent on energy
imports, and is projected to be the world’s third-largest consumer of energy by 2030 (Madan 2006). Currently, 75 percent of India’s oil
imports come from the politically volatile Middle East, and India is seeking to diversify the sources of its energy supply by developing
stronger economic ties with the African continent (Sharma and Mahajan 2007). Therefore, the data shows that 80 percent of India’s
imports from Africa are comprised of mineral fuels, and a similar picture with China’s imports from Africa (70 percent), and with Brazil’s
(85 percent) (CII 2013). Consequently, the composition of bilateral trade between the BRICS and Africa has thus far mostly reflected
traditional colonial patterns of dependency, in which African countries continue to import manufactured goods and higher value-added
goods from the BRICS countries while they still largely export only primary commodities to them. In India’s case, over two-thirds of its
imports from Africa are comprised of crude oil and gas, while gold and other precious metals account for another 16 percent (CII 2013).
In the competition for influence in Africa, India cannot match China’s much higher degrees of aid, trade and investments when it comes to
resource diplomacy, state backing for private sector investments, and the provision of credit and aid to African countries. According to
Mawdsley and McCann (2010), India compensates for this with rhetoric of being a true friend and equal partner of Africa that is keen to
facilitate development on the continent, as defined by Africans themselves, in the spirit of South-South solidarity and mutual benefit.
However, India’s policy toward Africa is different from China’s more in terms of its form/degree than of its intent, and it is important to
note that, “when stripped of its rhetoric, it is hard to ignore the similarities between the African strategies of India and China,” which
include access to energy and resources, new trade and investment opportunities, and the forging of strategic partnerships to secure these
(Mawdsley and McCann 2010). India is also courting African political support for its bid at winning a UN Security Council seat in the future.
The BRICS trade and investment strategies and use of BITs are also seeking to advance the trend in agricultural outsourcing. Of the 82
listed investor countries in the Land Matrix database, Brazil, India, and China account for 16.5 million hectares, or around 24 percent of
the total hectares sold or leased worldwide since 2000. India has acquired around 3.2 million hectares from East Africa, mainly Ethiopia
and Madagascar and 2.1 million hectares from southeast Asia (Indonesia and Lao People's Republic). Interestingly, India is also among top
10 countries where land has been acquired by other nations, with nearly 4.6 million hectares of land having been acquired from India by
foreign investors in 113 separate deals as of 2012 (Land Matrix 2012).
The roles of Russia and South Africa within the context of “land grabbing” have been distinct from those of India, China and Brazil in that
Russia has been the least involved in overseas land deals (likely due to its abundant supply of arable land at home), and where South
African firms have engaged in such investments, the crops produced are generally sold on the global market rather than imported back to
South Africa. Therefore the efforts undertaken by the South African Government primarily concern international trade, rather than the
creation of legal incentives to guarantee food security through agricultural outsourcing (Ferrando 2013).
On the issue of restrictions on FDI in agriculture, some have criticized Brazil for its hypocrisy on the “land grabbing” question. Whereas on
the one hand, Brazil introduced new legislation to prohibit foreign ownership of Brazilian land, it has been at the same time pursuing a
policy of land concentration and massive industrialization, both nationally and abroad, with specific attention to the production of
agrofuels (Hoffstatter 2009). For example, Thaler (2013) has criticized Brazil’s investment in the production of biofuel feedstock in
Mozambique – a country where the vast majority of the population experiences high levels of food insecurity, and questioned whether the
emphasis on biofuel production can be reconciled with enhancing food security and furthering the government’s goal of poverty reduction
(Thaler 2013).
As Cheru and Obi (2011) noted, the renewed interest in Africa by China, India and others has definitively marked a new dimension in the
history of South–South relations, but it remains to be seen if this will provide a more progressive and alternative pathway for development
or if it will simply reproduce new forms of asymmetrical relations.
28
ANNEX 3. Steps in Liberalizing India’s Overseas Investment Policy
Date
June 2000
March 2003
January 2004
2005
May 2005
March 2006
March 2006
July 2006 - June 2008
April 2007
May 2007
June 2007
June 2007
September 2007
September 2007
September 2007
September 2007
April 2008
June 2008
August 2008
September 2008
April 2010
May 2011
May 2011
May 2011
June 2011
July 2011
2011
Policy Reform
The Foreign Exchange Management Act (FEMA) allows for increased use of international currency reserves in
India for financing overseas investments by Indian firms.
The per annum upper limit of US$ 100 million for automatic approval of overseas investments was eliminated,
and enabled Indian firms to invest up to of 100% of their net worth.
Indian firms are allowed to invest up to 100 percent of their net worth in overseas Joint Ventures (JVs)/Whollyowned Subsidiaries (WOS) without any separate monetary ceiling.
Indian firms are allowed to float Special Purpose Vehicles (SPVs) in international capital markets to finance
acquisitions abroad facilitating the use of leveraged buy-outs. Since then, SPVs set up in off-shore financial
centres, such as Mauritius, Singapore and the Netherlands, have been mainly used as conduits to mobilise funds
and invest in third countries, a process which offers taxation advantages and easier access to financial resources.
Indian firms are allowed to invest up to 200 per cent of their net worth in overseas JVs/WOS without any
separate monetary ceiling.
General permission for disinvestment: Under the Automatic Route, Indian parties allowed to disinvest without
prior approval of RBI subject to certain conditions.
Proprietorship/partnership concerns: To enable recognised star exporters with a proven track record and a
consistently high export performance, the proprietary/unregistered partnership firms allowed to set-up JV/WOS
outside India with prior approval of RBI.
Investment by Mutual Funds registered with SEBI: Aggregate ceiling for overseas investments by MFs increased
from US$ 1bn to US$ 2 billion, which has gradually been increased to the present level of US$ 7 billion. A limited
number of qualified Indian mutual funds are allowed to invest cumulatively up to US$ 1 billion in overseas ETFs
permitted by SEBI.
Overseas Investment by Indian Venture Capital Funds (VCFs) registered with SEBI: VCFs permitted to invest in
equity and equity-linked instruments of off-shore venture capital undertakings subject to an overall limit of US$
500 million and SEBI regulations.
Indian banks are allowed to extend funded and/or non-funded credit facilities to WOS of Indian companies
(where the holding by the Indian company is 51 per cent or more) abroad.
Portfolio Investments by listed Indian companies: The limit for portfolio investments is enhanced from 25
percent to 35 percent of the net worth of investing company as on the date of its last audited balance sheet.
The limit for financing overseas investments under the RBI’s Automatic approval route is enhanced from 200
percent to 300 percent of the net worth of the Indian party.
Portfolio Investments by listed Indian companies: The limit of portfolio investments enhanced from 35 percent
to 50 percent of net worth of the investing company as on the date of last audited balance sheet.
The limit under the Automatic route enhanced from 300 percent to 400 percent of the net worth.
The aggregate ceiling for overseas investment by mutual funds, registered with SEBI, was enhanced from US$ 4
billion to US$ 5 billion.
RBI established online automated process of allocation of Unique Identification Number (UIN) for facilitating
overseas investments.
The aggregate ceiling for overseas investment by mutual funds, registered with SEBI, was enhanced from US$ 5
billion to US$ 7 billion. This allowed a limited number of qualified Indian mutual funds to invest cumulatively up
to US$ 1 billion in overseas Exchange Traded Funds, as may be permitted by the SEBI.
Overseas investments in energy & natural resources sectors: Indian companies are allowed to invest in excess of
400 percent of their net worth as on the date of last audited balance sheet in the energy and natural resources
sectors.
Overseas investments by Registered Trust/Society: Registered Trusts & Societies engaged in
manufacturing/educational sectors allowed to invest in the same sector in JV/WOS outside India with the prior
approval of RBI.
Overseas investments by Registered Trust/Society: Registered Trusts & Societies (which have set up hospitals) in
India allowed to make investments in the same sector in a JV/WOS outside India with the prior approval of RBI.
Participation of Indian companies in consortium with international operators: Indian companies are allowed to
participate in a consortium with other international operators to construct and maintain submarine cable
systems on co-ownership basis under the Automatic Route.
Performance guarantees issued by the Indian party: Fifty percent of the amount of performance guarantees
allowed to be reckoned for the purpose of computing financial commitment to its JV/WOS overseas.
Performance guarantees issued by the Indian party: Indian Parties are allowed to extend corporate guarantee on
behalf of the first generation step down operating company under the Automatic Route subject to limits.
Restructuring of the balance sheet of the overseas entity involving write-off of capital and receivables: Indian
promoters of WOS abroad or having at least 51 percent stake in an overseas JV, allowed to write-off capital or
other receivables in respect of the JV/WOS.
Disinvestment by the Indian parties of their stake in an overseas JV/WOS involving write-off: Indian parties
allowed to disinvest without prior approval of the RBI, where the amount repatriated on disinvestment is less
than the amount of the original investment with certain conditions.
Since July 2011, RBI has been disseminating the data in respect of outward FDI on a monthly basis on its website.
Government of India approves a policy to support raw material asset purchases made by select public sector
undertakings (PSUs) abroad. Under the revised policy, the overseas investment limit for 'Navratna' firms has
been raised from Rs. 10 billion to Rs. 30 billion for any asset buy-out, and for the ‘Maharatna’ firms, the limit has
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March 2012
March 2012
August 2013
been set at Rs. 50 billion.
Indian firms no longer need to seek it RBI approval to open foreign currency accounts abroad.
The RBI limits on financial guarantees by Indian banks in financing overseas investments in the JVs or WOS of
Indian firms are calculated differently, allowing for more flexible financing through counter guarantees or
collateral.
In response to dramatic fall in the value of the rupee, and in an effort to more carefully the monitor the outflow
of scarce foreign exchange used in overseas investment deals, the RBI reduces the limit on the size of overseas
investments from 400 percent of the Indian investors’ net worth to 100 percent of their net worth under the
RBI’s Automatic approval route. Investments higher than this amount now need to go through the Prior Approval
route from RBI.
Source: Various published news reports.
ANNEX 4. Recent State Restrictions on Foreigners Getting Farmland
Country
Algeria
Argentina
Australia
Benin
Bolivia
Brazil
Colombia
DRC
Ecuador
Restriction on foreigners acquiring farmland
A 2010 law imposes tight restrictions on foreign investment in farmland.
In December 2011, Congress adopted National Law No. 26737, establishing a national ceiling: foreigners
cannot own more than 15 percent of the country's farmland. It also establishes that foreign investors
and companies from any given country cannot own more than 30 percent of that amount, while
individual companies or investors cannot hold more than 1,000 ha each, and foreigners cannot possess
land within a security limit inside the country's borders or alongside large permanent water bodies, the
law says.
Large deals are subject to review; In October 2012, the government announced that – to increase
transparency, and following the examples of the governments of Queensland, the US and Argentina – it
would create a register of foreign owners of Australian farmland based on a national consultation.
Adopted a new land law in January 2013. Land deals involving more than two hectares will require
authorisations (on a scale ranging from the local district to the national level, depending on the surface
area), with a maximum limit per investor nationwide of 1,000 ha. The new code also lays down
requirements on the use of land to help fight speculation and promote sustainable development,
requiring that leases and concessions must be linked to development projects that respect ecological
balances and contribute to environmental protection and food security. These projects are expected to
be approved and monitored by local or municipal authorities.
Foreigners in Bolivia cannot acquire state lands, but they can acquire private lands. Local residence is
required and land rights are protected by international investment treaties (where these have been
signed between Bolivia and a given foreign country).
In August 2010, Brazil's attorney general issued a re-interpretation of a 1971 law, which had not been
enforced, that would limit sales of farmland to foreigners to "50 modules", roughly equal to 5,000 ha.
The decision called for strict enforcement of the law, saying foreigners could not own more than 25
percent of any municipality. No more than 10 percent of a municipality could be owned by foreigners of
the same nationality, and the same rules should also be applied to Brazilian agricultural companies with
more than 50 percent foreign capital. These proposals are still moving through congressional
committees and not yet resolved. Meanwhile, the government has published a framework set of
guidelines that require foreigners or foreign companies with authorisation to work in Brazil to provide
documentation justifying the amount of land they want to purchase, to improve the national registries.
Apart from these land ceilings, frontier areas – a strip of 50 km inside the national borders of Brazil – are
"no go" zones, off limits to private investors wishing to acquire land, for national security purposes.
Parliament is in the process of debating various proposals. The proposal from the Alternative
Democratic Pole (Robledo) was to amend the constitution to limit the amount of farmland foreigners
can own to "one family unit". It also clarified that unused land shall be considered state property and
can only be rented or utilised (e.g. through usufruct arrangements) by native Colombians. The
Conservative Party (Andrade) also proposed a constitutional amendment to limit purchases by
foreigners. The Ministry of Agriculture, on the other hand, argued for an ordinary law instead of a
constitutional amendment to deal with the matter. In late December 2012, the National Union party's
proposal (Lozano) to limit the amount of land that foreigners can purchase to "15 percent of a
municipality's rural area" was approved by the congress's fifth commission, and will probably be
examined together with a proposal from the administration in early 2013. June 2013 was the deadline
to finalise all this.
In June 2012, a new land code came into effect in the DRC. Under its terms, only Congolese citizens or
companies that are majority-owned by Congolese nationals are allowed to hold land. As of early 2013,
the rules for implementation of this measure had still not been developed and the government is
already talking about modifying it, apparently, under heavy pressure from foreign investors to give them
greater rights. According to the UN news agency IRIN, the government may even be contemplating
buying land itself in order to sell it to foreign companies.
The government is currently considering a land bill which may outlaw the establishment or transfer of
land ownership by/to foreign entities, people or capital beyond the amount of 300 ha.
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Hungary
New Zealand
Paraguay
Peru
Poland
Romania
Rwanda
Tanzania
Ukraine
Uruguay
In July 2012, the government led by Conservative Prime Minister Viktor Orban submitted a bill to
parliament which aimed to ban foreigners from buying farmland once a moratorium is lifted in 2014.
Social movements, however, say it will accelerate landgrabbing in Hungary. Since the beginning of its EU
accession process in 1994, Hungary's land law has stipulated that foreign investors can only rent (not
buy) agricultural land and they can only get 300 ha for a maximum lease period of ten years. Yet
loopholes and cronyism have led to a situation where more than one million hectares are currently
controlled by foreign investors, mainly Austrian farmers (600,000-700,000 ha) but also Dutch, German,
Danish, British and other farmers and companies as well. This represents 15-20 percent of all the
agricultural land in Hungary. In December 2012, parliament adopted the bill, which modifies the
constitution.
Any farmland purchase bigger than 5 hectares or worth more than NZUS$ 100,000 (US$ 84,000) by a
foreign investor must get clearance from the Overseas Investment Office. To get clearance, overseas
investors have to meet various criteria, such as demonstrating relevant experience, good character and
the value of the investment for New Zealand.
In 1940, the Paraguay Land Act made it illegal for foreigners to own land. This was scrapped by military
dictator Alberto Stroessner in the 1960s and since then Paraguay's countryside has attracted a steady
inflow of foreign agribusiness companies, farmers and investors, which peaked in 2006-2010. In
principle, only Paraguayans can get control of land redistributed through the agrarian reform
programme, but this has not been enforced. Similarly, the Paraguayan parliament passed a law in 2005
that stated foreigners should not be able to buy land within 50 km of the border, but this was not
respected or implemented either. Only in October 2011 did the Lugo administration issue a decree to
put parliament's act into practice, in an effort to regain control of a runaway situation where foreigners
control 9-10 million hectares of farmland or 25-30 percent of all the arable land in Paraguay. In
December 2011, President Fernando Lugo made it clear that he planned to propose legislation along the
same lines as that which had just been adopted in Argentina and was under development in Brazil.
Lugo's ouster in mid-2012 by agribusiness-aligned forces put an end to such intentions.
Since 2012, Peru's parliament has been considering two bills to limit the concentration of land
ownership, which has exploded recently. The bills do not include limits regarding nationality, though
some of the big new land grabbers in Peru are foreign investors like Parfen of Uruguay. Like Brazil,
Peru's constitution holds that no foreigners may own or possess land within 50km of its border,
although exceptions are possible.
The moratorium on the sale of Polish farmland to foreign European interests will expire in 2017. In the
meantime, citizens of the EU-27, Iceland, Liechtenstein and Norway can buy up to one hectare of
agricultural land without a permit. Any greater land area requires approval from the government and
shall not be subject to ownership but lease. Right now, the leasing rules as well as the situation to be
put in place post-moratorium are under review.
In October 2012, the centre-left government announced that when the domestic market is liberalised in
2014 as per EU rules, it plans to either impose a quantitative ceiling on foreign investors wanting to
acquired farmland in Romania or require that they have actual experience in agriculture. This, after
800,0000 ha — or 6 percent of the country's entire agricultural area — have already been signed off to
foreign agribusiness concerns.
Rwanda is preparing a new land law that aims to limit farmland leases to foreigners to a maximum of 49
years. As in other African countries, like Sudan or Benin, it will also establish requirements on the use of
land, e.g. foreign investors will have five years to bring the land into production or face repossession.
In Tanzania, no foreign investor was supposed to hold more than 50 acres. However, this ceiling was not
respected. In 2012, parliament urged the government to suspend all large scale land allocations to
foreign investors. Starting in January 2013, there are ceilings imposed on long-term land concessions by
foreigners and domestics alike. For sugar, the ceiling is 10,000 ha and for rice 5,000 ha. Additionally, the
Tanzania Investment Centre is in the process of publishing guidelines for the functioning of a national
land bank and allocations of land.
Ukraine will be lifting its moratorium on the sale of farmland to foreign investors in 2013. In preparation
for this, several controversial pieces of legislation have been prepared. For example, one relating to the
cadastre system was debated and adopted, while another relating to the land market is still to be
finalised. Until now, foreigners have not been allowed to buy farmland but they have been allowed to
rent it from individual farmers on a longterm basis. For this, they were required to set up a business
identity/operations in Ukraine and it was understood that once the EU moratorium was lifted they
would have the right to buy the land they had leased. In this way, much land has been signed off to
foreign investors in Ukraine (over one million hectares or 3 percent of the country's agricultural area). In
the drafts of the new rules to govern the land market, various ceilings and tax schedules have been
proposed. It is not clear, however, what the final rules will be when the moratorium is lifted.
The Socialist Party has proposed a bill that forbids the purchase of farmland for agricultural or forestry
purposes by foreign governments or companies linked to foreign governments. The ruling coalition,
Frente Amplio, proposed another bill that seeks to limit the amount of farmland that foreign private
companies can acquire, with a particular view to stopping speculators. The debate is still under way.
Source: GRAIN (2013).
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