The Department of Industrial Policy and Promotion under the Ministry of Commerce and Industry issued a "Consolidated Foreign Direct Investment (FDI) Policy" effective April 1, 2011. This Policy is part of the on-going effort by the government to promote FDI by progressively removing restriction and reducing regulation of capital from abroad.
The policy with respect to seeds is one of the major changes incorporated in this policy. In the agriculture sector, FDI is now permitted in the development and production of seeds and planting material, without the stipulation of having to do so under ‘controlled conditions’. Controlled conditions means control of rainfall, temperature, solar radiation, air humidity and culture medium through protected cultivation under green houses, net houses, poly houses or any other improved infrastructure facilities where microclimatic conditions are regulated. Already, existing policy permitted 100% FDI through the automatic route in horticulture, floriculture, animal husbandry, pisciculture, aqua culture, cultivation of vegetables, mushroom and services related to agro and allied sectors. In short, what it means is that there is next to no curbs on foreign direct investment in many agricultural activities and services.
Agriculture is fast becoming big business in India. There is a huge demand for processed foods in India and abroad. Growing, harvesting, transporting and packaging food are emerging as very profitable investment opportunities. Nestle, Cadbury, Hindustan Lever, Godrej F&B, Dabur, ITC, Britannia are among the giant enterprises that are getting deeper into Indian agri-business. By 2015, the Indian food industry is estimated to grow from the current level of $181 billion to $258 billion.
Both in terms of foreign investment and number of joint- ventures/foreign collaborations, the consumer food segment has the top priority. The other sub-sectors of the Indian agro industry that are being eyed by private capital are the deep sea fishing, aqua culture, milk and milk products, meat and poultry segments. Agricultural services such as information and advisory using mobile technology also offer a huge market for investments under current conditions.
The government's FDI policy is in accordance with the overall orientation of the economy that enables full freedom, without any barriers, for Indian and foreign capital to enter all sectors of the economy - from the exploitation of the natural resources of the country, to health, education and agriculture. This orientation of agriculture ensures that production and trade will be governed solely by the aim of maximising returns for the largest monopolies. Like in other sectors, initially, a handful of large domestic companies entered select activities of this sector. This was allowed under the guise that government investments alone was insufficient to develop the infrastructure and apply the technology necessary for growth, to bring in greater efficiencies in production, preservation of agricultural products and in distribution. The elaborate public machinery that was set up in the early years of the 5-year plans has been gradually allowed to become totally useless - whether it is the seed farms or the agricultural extension services or similar support to the producers. The stage is now set for penetration of private equity funds into the sector (see box). This means that capital will flow in when it sees opportunities for maximum profits and flow out, just as quickly, when there are other opportunities outside of Indian agriculture.
Impact of private capital inflow into agriculture
The subordination of agriculture to the interests of capital will result in extreme volatility of prices. This has already been experienced in commodities that have been traded for speculation, like cotton. Indian agriculture will get increasingly integrated into the world capitalist imperialist system, in the interest of the largest banks and investment funds. More and more, the allocation of agricultural land will be determined by the interest of monopoly foreign finance capital. Contract farming will be on the increase and millions of peasants will face the threat of their land being acquired. Either they become slaves of the giant corporations or they have to sell their land and get out of agriculture.
Allowing the entry of FDI and private corporations in agriculture is an outright attack on the peasants, workers and the working people. Agriculture, which is the activity of producing food for nutrition and raw materials for production of other essentials, should not be geared to the big capitalist corporations' desire to make maximum profit.. Already, the masses of people in India are reeling under spiraling prices of every essential, food and non-food items. Increasing the role of private capital and raising it to a higher scale will only make the situation worse for the people.
There has been opposition from many peasant organisations to penetration of private capital into agriculture. This has to be stepped up. All aspects of agriculture - production, storage and distribution of food must be planned and implemented in the interests of the majority through producer cooperatives and organisations that are under social control (for storage and distribution). Private capitalist corporations who are raking in maximum profits from food trade today must be taken over without compensation, in the national interest and no further privatisation of any agricultural or other economic activity must be permitted. Only then is it possible to ensure guaranteed supply of essential agricultural produce at stable and affordable prices to all working class families.
Recent announcement of investment by Indian and foreign finance capital
The food processing sector attracted US$ 130 million of foreign direct investment (FDI) in the first eight months of the fiscal year and a total of US$ 1.2 billion FDI during April 2000-January 2011. While investments have, in the main, been in food processing, companies focusing on farm production have also received commitment of private funds from abroad:
Standard Chartered PE (private equity, meaning investment fund) has recently announced a $25-million investment in a basmati processing and marketing company.
The World Bank's investment arm, IFC is planning to invest $30-million in another basmati rice company.
India Agribusiness Fund (IAF) is a $120-million strong fund that has also invested $10-million in one of the country's largest basmati rice exporter.
PE Fund, Blackstone invested $63-million in the sector
Carlyle has invested funds of up to $22-million in the dairy sector in 2010.
Dedicated agri-funds are also being launched, such as
I-Farms, Godrej group-backed Omnivore, Rabobank*-sponsored India Agribusiness fund
*Rabobank is the largest bank for the US food and agricultural industry has received approval from the Reserve Bank of India (RBI) to establish a banking presence in India.