FDI in multi-brand retail to help farmers: Sharad Pawar

Union agriculture minister Sharad Pawar  has a misconceived notion that FDI in multi-brand retail will cut down post-harvest losses to farmers and bring investment in cold-chain facilities. The stated purpose of liberalising FDI in retail is that it will attract investments for modernising India’s supply-chain infrastructure, especially for the agricultural sector, in turn, providing better returns to farmers and small agro-processing units through enhanced direct sourcing as well as curbing inflation by reducing wastage. The argument is that the giant foreign retail chains will squeeze out the middlemen thereby providing higher prices to farmers and at the same time provide large investments for the development of post-harvest and cold chain infrastructure. In India, the relaxation of regulations already allows foreign direct investment in cold-chain infrastructure to the extent of 100 percent. But there has been modest increase in foreign direct investment in cold storage infrastructure. According to them, the cold storage infrastructure will become economically viable only when there is strong and contractually-binding from organised retail. The risk of cold storing perishable food, without an assured way to move and sell it, puts the economic viability of expensive cold storage in doubt. The condition for making at least 50 percent of the total investment in ‘back end’ infrastructure under the proposed FDI scheme is being cited to argue that this would lead to more cold chains and other logistics, benefiting the farmers. But experiences of other countries, however, show that procurement by various multinational retailers do not benefit the small farmers. “Over time, they receive depressed prices and find it difficult to meet the arbitrary quality Standards.  Experiences show that nowhere in the world have the farmers who supply goods to big retail chains benefited. Walmart is reported to be planning a series of partnerships with small and mid-level suppliers in India across product categories to create a big list of private label brands that will be priced substantially lower - as much as 10-15% - than established products and brands. The move is part of the company's strategy to go deeper into the into those states which do not allow Walmart to set up shops. It also signifies that Walmart is going against its original commitment that that will directly procure from the farmers and hence the farmers will get better price. According to Mr. Jain 95% of what they sell will procured from within the country. But what is the guarantee that Walmart will continue to do so. In fact, in other countries, including the United States, Walmart is selling cheap Chinese goods.  Walmart has already has a joint venture with Bharati. It is alleged that Bharti-Walmart is illegally carrying out multi-brand retail trade despite being permitted only to carry out wholesale cash-and-carry or wholesale trade in the country. On the basis of the suit filed by environmental activist Vandana Shiva, the Delhi High Court sought replies of the Centre, Bharti-Walmart and Bharti Retail on a plea for a probe against the firms for allegedly carrying out retail trading in the multi-brand sector in violation of India’s existing FDI policy. Thus, even before getting permission to operate, Walmart has violated Indian rules and regulations and has unlawfully involved in multi-brand retail trading.

 Dr.C.Murukadas, The Times of India Oct 13, 2012