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CoverStory

Large farm lobbies back the government

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arge farm lobbies are backing the government's decision to allow foreign supermarkets to set up shops in the country, saying the move will shorten the supply chain and get growers a larger share of the final selling price. Most farmers, however, want the government to go a step further and make it mandatory for retailers to buy 75% of their produce directly from farmers, thereby bypassing the "restrictive" mandi auction system. "Traders and middlemen push up prices but farmers do not get a rupee more. No political party is talking about our interest because we are not organised the way labour unions are nor do we have deep pockets like traders. India has 600 million farmers, 1,200 million consumers and 5 million traders. Both farmers and consumers are benefitted by the government decision," said P Chengal Reddy, secretary general of Consortium of Indian Farmers Associations (CIFA). The policy reform will have a positive impact on the entire supply chain from farm to fork and will benefit all, said Ajay Jakhar, chairman, Bharat Krishak Samaj. The organisation has more than 75,000 progressive farmers under its fold. However, he says that it should have been made mandatory for foreign companies to purchase more than 75% of fruits and vegetables directly from farmers. "We are fine with this policy but not thrilled," he said while emphasising that he had hoped for "something more" to help farmers become part of India's growth story. The farming community, desperately wanting an alternative to the "exploitative" system of APMCs and middlemen, is looking at FDI in retail as an opportunity to explore new marketing arrangements. "Our government has not been able to bring transparency in the way agricultural produce price is decided by the middlemen at APMCs. Doing away with the middlemen is most important for us. It will not only help farmers but also consumers," said Raghunath Patil, chairman, Maharashtra Rajya Shetkari Sangathana. "FDI in retail will open alternative avenues of sale for us," Reddy added. He said the mandi system does not favour farmers because they lose 5%

of the value in transportation, 10% in broker commission and 10% in quality parameters. "Direct purchase by large retailers will solve this problem," he said. The thumb rule of pricing from a farmer to a consumer in perishables such as fruits and vegetables is 1:2:3:4. What a farmer sells for 1 is sold at the mandi for a 2-fold gain, which becomes 3-fold at the consumption end of the mandi and 4-fold when it reaches the consumer through a retailer. The government has said that at least 50% of total foreign direct investment brought in shall be invested in 'back-end infrastructure' within three years of the induction of FDI. 'Back-end infrastructure' will include investment made towards processing, manufacturing, distribution, design improvement, quality control, packaging, logistics, storage, warehouse and agriculture market produce infrastructure. Sanjay Kaul, MD of leading supply chain solution provider National Collateral Management Services, said: "India loses nearly 20% -40% of its 230 million tonne of fruits and vegetables annually due to lack of proper storage system. We require more cold chains in the country. The return from this investment is at least 10-12 years. Therefore, we have to see whether foreign companies can take such a long risk on their capital investment. But this is a good move by the government to create back-end infrastructure and opens up possibilities of setting up joint ventures in this sector." Gokul Patnaik, chairman of Global Agri System, which is into consultancy and supply chain managements, said FDI in retail was good but not to be seen as a panacea. "We hope that the new policy will help in people looking at agriculture as an end-to-end business and not a piecemeal approach," he said. Farmers said there was an immediate need to set up agri infrastructure. Meanwhile, farm lobbies are planning to meet CMs on retail FDI and are organizing workshops in villages to create awareness among farmers on how it can help them to achieve better prices. Himachal farmers are also excited about FDI as it would help them with cold chains and an efficient transportation system, which no one can provide as it needs tons of money.

How They See it "Our campaign would spread awareness at the grassroot level that FDI is a blessing which would lead to massive job generation, inflow of foreign investments in villages, reduce farm wastage, provide farmers' their due in form of higher prices for their produce and will not have any impact on kirana merchants in any way whatsoever"

Assocham, President, Rajkumar Dhoot them. They are progressive retailers who know how to woo today’s smart customers. Tejpal Bansal of Noida Sector15 is such one kiranawala. He said, “Customers prefer my store as we give them friendly atmosphere, A-class service and good products at reasonable rates. These global retailers like Wal-Mart cannot pull customers from all corners. Every player has a place in this sector. Small shops will never go, as they fulfill daily household needs. Apart from this, big retailers do not entertain bargaining while we do it. So, there will be no effect of FDI on us.” Pradeep Kumar (Baksa Market, Gurgao) concurs with Bansal. He said, “The numbers of our customers are increasing as we have changed our marketing strategy. We have friendly workers who keep customers happy. We give good service, excellent products and occasional discounts, specially during festivals. So, we do not oppose or fear FDI or Wal-Mart”.

AgriBusiness & Food Industry w October 2012

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AGRI BUSINESS & FOOD INDUSTRY  

India's only monthly magazine having maximum presence in National & International Exhibitions. Regular topics cover the food processing sect...

AGRI BUSINESS & FOOD INDUSTRY  

India's only monthly magazine having maximum presence in National & International Exhibitions. Regular topics cover the food processing sect...

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