Big farm lobbies favor FDI in multi-brand retail | SupportBiz

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Big farm lobbies favor FDI in multi-brand retail

Big farm lobbies in India, where agriculture accounts for 16 percent of the country’s GDP and 10 percent of its export earnings, believe that foreign direct investments into multi-brand retail will benefit farmers in the years to come.

“As a matter of policy we support FDI in multi-brand retail. FDI in multi-brand retail, which I think will benefit 10-15 percent of India’s farmers to begin with, brings with it innovation and newer technologies to farming, and storage of produce. These new methods will ultimately trickle down and benefit everybody. I expect farmers to fully understand the benefits (of FDI in multi-brand retail) in three to four years,” said P.Chengal Reddy, secretary general, Consortium of Indian Farmers Association (CIFA).

“Traders do not make any value additions to farm produce. But they earn more on sales. FDI in multi-brand retail is beneficial. It will bring in another player into the system and create competition, which the farmers can leverage for higher prices. The farmer gets his share of the consumer price. The regulation could have been tweaked to include a compulsory local sourcing clause, of around 30 percent, to benefit our farmers,” said Ajay Vir Jhakar, chairman, Bharat Krishak Samaj.

The existing market system is exploitative and the nexus between ‘middlemen,  government officers overseeing sales at market yards and political elements,’ fleeces farmers across the country, said a CIFA media release. Traders have a monopoly on key agricultural products because the system, including regulation and the APCM Act, is designed that way, Jhakar said.

Problems at government controlled market yards, where farm produce is auctioned, are aplenty, according to the CIFA media release. It listed inaccurate weighing machines; price manipulations by middlemen under various pretexts such as reduced demand or a fall in international prices; absence of officers at auctions held under the cover of darkness; middlemen demanding a 10 percent commission for auctions; and middlemen labeling 10 percent of the produce as poor quality produce.

“90 percent of my farmers do not know what is hurting them. They are gullible. Cartels manage prices and there is no price discovery mechanism today,” Reddy said.

India’s farmers have always been open to adopting new techniques and technology. BT Cotton and hybrid tomatoes are examples of this, Reddy said. Farmers would step up to supply to large retail chains, he said.  

“Large retailers will demand quality in products and packaging. This will compel them to build links with farmers for continuous supply of produce. This leads to long-term contracts between both parties. Some products might need processing before being transported and this will create processing and cold storage facilities in the villages,” Reddy sadi

“Profits are in the front-end, that is, in selling to the consumer,” said Jhakhar. Which explains why back-end infrastructure has not developed the way it should in India. FDI could change all of this, Jhakhar said.