The Telegraph
Thursday , September 27 , 2012
Since 1st March, 1999
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Delhi-Patna, FDI track shift

Patna, Sept. 26: As the country’s agriculture minister between 1999 and 2001, Nitish Kumar had been part of the cabinet that endorsed 100 per cent FDI in multi-brand retail, which, a decade later in his new avatar as Bihar chief minister, he is opposing tooth-and-nail on the ground that farmers and small traders would be put out of business.

Documents available with The Telegraph show Nitish was part of the Union cabinet headed by Atal Bihari Vajpayee that decided on February 1, 2000, to allow FDI in multi-brand retail.

In the light of the decision, a group of ministers was constituted to facilitate the proposal for allowing entry of foreign investors in the sector.

The proposal, which had the approval of the commerce and industry ministry, clearly stated, “India is losing out on many opportunities of growth and employment generation.”

The proposal, drafted by M.S. Srinivasan, then joint secretary in the commerce and industry ministry, enumerated the advantages of FDI in retail thus: “Huge capital infusion by foreign investors as modern organised retail business involves substantial investment in real estate, storage and transport logistics, IT applications, marketing and merchandising etc. A direct fallout of huge FDI in this sector would be employment generation, both direct and indirect.”

Nitish, who is now making a strong pitch against even 51 per cent FDI in multi-brand retail at his various Adhikar Yatra meetings across the state, was then the agriculture minister in the Vajpayee cabinet that decided to allow FDI in retail over a decade ago.

A senior IAS officer, who spoke under cover of anonymity, said the chief minister’s opposition to FDI is surprising as his government has been reaping the benefits of liberalisation and economic reforms ushered in by the Congress and then aggressively pursued by the NDA, of which the JD(U) is a part.

“Even laymen know that liberalisation ushered in the revolution in information technology. It has improved overall productivity and growth. Like the IT sector, FDI in retail is also part of the economic reforms that India introduced in 1991 and has been following up on them,” said the officer. “Creating fear psychosis against FDI is neither in the interest of the state nor its people.”The bureaucrat pointed to neighbouring Bengal where the then ruling Left Front had vigorously opposed computerisation in the eighties, on the ground that it would lead to a loss in jobs, but later switched tracks and adopted an IT-friendly policy that has created huge employment opportunities besides adding to growth.

Nitish’s objections to FDI in retail are rooted in the fear that it would lead to a loss of income for the unorganised sector — the local kirana stores, the middlemen and small traders.

“I will not allow FDI in retail in Bihar at any cost. It will break the backbone of the farmers and small traders. The foreign retailers will use the huge retail market of the state for profiteering at the cost of the local retailers which I will not allow. I have been opposing it since the very beginning,” the chief minister harps at every public rally he addresses.

But contrary to Nitish’s vocal opposition, local kirana traders are not that apprehensive.

The Bihar Chamber of Commerce has sided with the chief minister and hence the kirana operators will not speak officially against their trade body’s stand. But The Telegraph in course of conversation with many top kirana traders found out that they were more curious than inimical about FDI.

“We are in the kirana business for over a century. We saw the V-2 mega-mart coming up in Maharaja complex, right next to our shop. Within a radius of 500 metres around Dakbungalow crossing, we have had two more mega-marts coming up in the last five years,” said an official of Patna Kiranas — one of the oldest kirana shops of Patna on the upscale Frazer Road.

“Notwithstanding these mega-marts, our business has grown by 30 per cent in the last five years. We have the network of customers who trust us and are buying from us for generations. Initially, they hopped to the marts. But they have come back to us with a vengeance for they are doubly sure about the quality of our goods,” he added.

Some top kirana operators agreed that FDI in retail should not be stopped.

“After all, they will bring in some new business model… some new knowledge in the arena. They might bring in new ways to develop customer relations. We can learn from what is novel about them and they too can compete with us for customers,” said a top kirana operator. “Customer satisfaction is key to business growth. If they come with some new knowhow to satisfy the customers, it will be good for us as we can learn from them.”

Kirana shop owners say FDI would ensure better infrastructure at the backend — warehousing, cold-storages will improve.

“While the workers can get job in infrastructure building, we too can use their storage to keep our goods by paying a rent. Business is always carried out in cooperation, not in confrontation. They will have to bank on the local infrastructure and indigenous goods to make their supply chain. I don’t find anything wrong with them,” said Sonu, a big kirana shop owner at Raza Bazar. “It will offer customers variety and choice. At the same time, it will lead us to learn the technique in global trade from them.”

Bihar’s storage capacity is poor compared to its farm output. According to the agriculture department’s records, the state produced 170 lakh tonnes of food grains in 2011 but it has a capacity to store only 9.5 lakh tonnes. The situation is woeful when it comes to storage of perishable items like vegetable and fruits. Against a production of 140 lakh tonnes of vegetables and 40 lakh tonnes of fruits in 2011, Bihar has the capacity to store only 13 lakh tonnes of fruits and vegetables.

Sources in the agriculture department said that owing to the absence of storage capacity, the farmers are either forced to make distress sale, losing on their earnings, or the commodities perish in huge quantities.

Ranapratap Singh, a senior lawyer in Patna High Court and also a big farmer who owns over 500 acres of land in Buxar, said: “In the context of Bihar which produces grains, vegetables and fruits in abundance, multi-brand retailers will make most of their investments in creating backend infrastructure that will be an asset to the state woefully lacking in such facilities. Besides, ensuring proper price to both — the producer and consumer — the infrastructures will open a whole lot of employment opportunities, both direct and tertiary.”