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Traders protest FDI in food retail

Traders, who form the BJP's largest traditional constituency, have come out against the Narendra Modi-government's decision to fully open up food retail to foreign investors.

By R. Suryamurthy & Jayanta Roy Chowdhury
  • Published 22.06.16
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New Delhi, June 21: Traders, who form the BJP's largest traditional constituency, have come out against the Narendra Modi-government's decision to fully open up food retail to foreign investors.

"By allowing FDI in food products, the government has opened up the multi-brand retail sector in the country. This is contrary to the promise made in the manifesto. The BJP came to power with this promise to protect the interest of small retailers. Now they are taking steps to please foreign investors," Praveen Khandelwal, national general secretary of the Confederation of All India Traders (CAIT), said.

BJP leaders Arun Jaitley and Rajnath Singh had earlier supported the CAIT's opposition to FDI in retail.

Khandelwal said food could not be separated from multi-brand retail. "It is part of the whole gamut of retail trade in the country." According to market research agency Crisil, food and groceries constitute 69 per cent of the Rs 25-lakh-crore retail market.

The Centre chose to ignore protests from small retailers by allowing 100 per cent FDI in food retail as part of a package of reforms unveiled yesterday.

Khandelwal said the move would put domestic retailers, including small shops, at a disadvantage because they would have to compete against players with deep pockets such as Walmart, Tesco and Amazon.

Analysts said the move would allow food retailers such as Sainsbury, Tesco and Marks & Spencer to enter the country. It can improve realisations of farmers who can sell directly to the big retailers. It will also benefit consumers who can get food at cheaper prices.

Global retail chains welcomed the decision. Rajneesh Kumar, senior vice-president (corporate affairs) of Walmart India, said, "The decision is very progressive and will help to reduce wastage, helping farm diversification and encourage the industry to produce locally.

"This reform will benefit farmers, give impetus to the food processing industry and create vast employment opportunities. We will study the policy document when the government issues it."<>

Added, Sreedhar Prasad, Partner - e-commerce, KPMG in India "this initiative could bring in investments in food infrastructure in India by the global players and provides for a platform to them to sell those products manufactured in India, thus opening up the Indian food market. Further, this could enable some of the existing e-commerce players to attract FDI in food category where they are selling only products manufactured or produced in India."

India is the second largest producer of fruits and vegetables in the world. However, it has very limited integrated cold chain infrastructure and storage facilities, causing heavy losses to farmers in terms of wastage in quality and quantity of the fruits and vegetables. Along with it, this chain is highly fragmented, and thus, the perishable horticultural products find it difficult to link to far-away markets, including retail markets, round the year.

Lack of storage facilities causes heavy losses to farmers in terms of wastage, particularly when it comes to fruits and vegetables. Estimates peg the post-harvest losses of farm produce at over Rs 1 trillion a year and 57 per cent of this is due to avoidable wastage and the rest due to other costs and commissions. Nearly 35-40 per cent of fruits and vegetables and nearly 10 per cent of food grains are wasted in India. Lack of poor farm infrastructure translates into high prices.

With 100 per cent FDI now to be allowed in marketing of food products produced and manufactured in India, it is expected that the farmers will also get better prices from the heavy reduction in post-harvest losses. It will also result in the strengthening of the backend infrastructure and lead to direct purchase by the retailers.

Said Piruz Khambatta, Co-chairman of the CII National Committee on Food processing Industry said the government move would have positive impact. He said "FDI ushers in advanced technologies and expertise that augment the supply chain management of the recipient organisations. Second, the supply chain efficiencies will help reduce wastage, such as seen in fruits and vegetables production. Third, it will help government curb inflation and bring down the interest rates. Last, the farmer will be the main beneficiary of this initiative."

"It has now been decided to permit 100 per cent FDI under government approval route for trading, including through e-commerce, in respect of food products manufactured or produced in India," the statement issued yesterday said.

He said the CAIT would take this issue to the people's court as the government had gone back on its promise and would also explore legal options to oppose the move.

Swadeshi Jagran Manch, an RSS-affiliate body, also termed the Centre's decision to relax FDI norms in various sectors as a "betrayal" of people's trust and it would act as a "death knell" for local businessmen.

"Opening up sectors like retail, defence and pharma to FDI and by relaxing norms is 'betrayal' to people of the country. In doing so, this government has not done good to the country in general and local businessmen in particular," SJM's national co-convener Ashwani Mahajan has said. Analysts warn that opening of the food sector can impact BJP's core voter group of traders as nearly 22 crore people are employed by small-time domestic retailers.