March 29, 2012

 

India to invest US$2.1 billion in African farms

 

 

About 80 Indian agricultural companies have invested over INR10,800 crore (US$2.1 billion) in commercial farming activities in under-developed countries of the region and African continent is the new destination.

 

Availability of land for corporate farming, better soil conditions, proactive approach of the respective governments and cheaper labour are some of the factors that are luring Indian companies to the African continent.

 

Oil seeds, cereals, flowers, tea are some of the crops being cultivated by Indian companies in countries like Rwanda, Uganda, Kenya, Ethiopia, Congo, Madagascar, Liberia and Ghana.

 

"Search for fertile and cheaper lands and labour are taking us to Africa. The governments in most of the African countries are gradually getting more democratic and stable. They are also proactive towards promoting industries, especially agriculture to meet the demand for food," said an official of Karuturi Global.

 

Bangalore-based Karuturi Global has over 100,000 hectares of land cultivating roses, oil palm, rice and corn in the continent.

 

"India does not allow corporate farming and it is difficult to get land. In India, if the productivity per hectare for soy is one tonne, in Ethiopia it is 1.6 tonnes," said VK Jain, director, Ruchi Soya.

 

Soy has 25,000 hectares of land in Ethiopia for cultivation. Corn and soy are cultivated as secondary crops. The company looks forward to an annual production of 40,000 tonnes of soy.

 

Jayshree Tea and Industries, part of BK Birla Group, finds that the cost of production is lower as there is not much need for fertilisers and pesticides due to better soil conditions. In Uganda and Rwanda, where it has plantations, the social cost of labourers is taken care of by the local government.

 

In Ethiopia, land is available for farming on lease for 25-45 years period for a cost of INR500-700 (US$9.78-13.69) per acre. On the other hand, land lease cost in Punjab varies from INR25,000-30,000 (US$489-587) per acre, as per a report by Technopak Advisors. Technopak finds that over 80 companies have invested INR10,800 crore (US$2.1 billion) for farming activities in the continent.

 

Most of the African countries provide several incentives for foreign agricultural companies. Some have good infrastructure like roads, irrigation and electricity. In countries with poor infrastructure, companies look at the long-term prospects.

 

"Countries like Uganda are looking for companies that will set up food processing units, contribute towards food security and transfer of technology to the region, apart from local employment generation," the Technopak study said.

 

Currently, a major portion of the agricultural produce is sold within the continent. Some nations do not allow export of the produce, but some do.