Friday, July 23, 2010

FDI in Retail industry- Farmers' perspective

The Department of Industrial Policy and Promotion DIPP has come up with a discussion paper which invites public opinion by July 31, 2010 and the subject is to allow FDI in multi-brand retail. This paper is favoring Foreign Direct Investment (FDI) in multi-brand retailing (Multiple brands in multiple products) sector which would allow the global giants to directly set up outlets in the country. Multi-brand global retail giants like the Wal-Mart, Shop rite, Metro, Carrefour and Tesco may soon enter into Indian retail markets if this bill gets approved. However, the expansion of supermarkets in developing countries is expected.

In India, growing middle class with changing consumption patterns are ideal for supermarkets to prosper. The total size of Indian retail sector, including organized and unorganized sector is $300 billion, where currently the organized sector accounts for 4% only but near future the supermarket retail chains are going to play major role in agro-food sector in India. The supermarkets concerns are stable, year around supply with high quality and competitive prices. Supplying to large chain supermarkets gives both potential and large opportunities to our Indian farmers. The biggest challenge is to follow the strict guidelines by the retail groups in terms of quality and safety standards since most of our farmers usually deliver their goods to open markets or to local wholesalers. Mainly Indian farmers are marginal and small who are having average farm size of 3.3 acres, lack of infrastructure and poor post harvesting practices.

In India 40% of harvests are lost in storage and transportation. We are the second largest producer of fruits and vegetables but our country is loosing Rs.1 trillion per annum, (estimated 50% of produce) going waste due to lake of storage facilities and difficult to link to far-away markets. We need large investments to improve our agriculture infrastructure in terms of seed supply, agrichemicals, processing, machinery, storage facilities, rural transportation and supply chain linkage to support the current retail trends. This could be achieved through private investors preferably by organized retailers whether domestic or Global. If it truly improves the farmer’s income, agriculture growth and food security, there is no need to be concerned about FDI or domestic.

My recommendation on FDI- Retail in farmers’ perspective.

1. First and foremost... the multinational retailer’s trade practices should not dampen the spirit of Indian farmers and consumers. FDI – Retail should be a process of integrating Indian economy to the global economy as well as farmers can be integrated into the world class retail market not on the mercy or control of global retail giants.

2. Retailing sector needs to be and Industry status because retail sector is the second largest employer after agriculture and generating 10 percent of GDP and 8 percent of the employment. Lot of rural youth and mediocre educational qualified people are employed in this sector.

3. Governments make sure that farmers have to receive the remunerative price should be between 60% - 70% (based on product category) of the price paid by the consumer.

4. International retailers should be mandated to work with farmers to improve yields by enabling them provide quality inputs, best farm technologies, timely credit and remunerative prices for their produces.

5. Government needs to identify the trends and ways of supporting farmers to meet the needs of modern supply chains and marketing systems to enable with the supermarket sector.

6. Government should ensure that the agro produces should be procured from the local producers and local people must be given priority in employment opportunities in processing and supply chain.

I submited this information to Indian Department of Industrial Policy & Promotion and if you have any ideas please share with me .