Companies & Sectors
FDI in retail: Middlemen will continue to make it difficult for us

The small farmer stands to gain little from allowing FDI, because no matter how much we wish, middlemen are not going to disappear while retailers need to focus on post-harvest businesses

Media discussion on allowing foreign direct investment (FDI) in retail looks sharply polarised. While one side portrays FDI as a ‘magic wand’, the answer to all problems right from the agricultural system to public distribution and unemployment, others are equally critical of its merits; and labelled it as ‘a failed model imported from US’.
What must be understood is that FDI will not change everything. No amount of FDI can change the uneconomical land holding pattern that defines Indian agriculture. Farming and harvesting equipment and techniques also cannot be expected to change and standardize magically. The small farmer stands to gain little from allowing FDI, because no matter how much we wish, middlemen are not going to disappear. Indians should be happy if the middlemen are removed. Whether it will create more or less employment is debatable.
Unless the big retailers decide to approach the farmer and provide him advances in terms of credits, equipment and seeds, dominance of the middlemen will continue.  India’s big retailers clearly lack the will to change. Retailers want things on their terms, at their time rather than adjust to the market practices. It will be a long time, before both change and meet somewhere in the middle.

At the top, there is a lack of awareness of markets and at the bottom; it is a question of having to work harder. I will elaborate. For instance, the farm produce reaches wholesale markets in the middle of the night. All the supermarket chains have fixed times for accepting the produce. Their reluctance to go to the markets in the middle of the night or morning makes them dependant on other traders, who add to the costs.

There is potential, but in order to realise it, the industry itself must change its outlook. A foreign player could actually change things, especially if they have a long-term view. Moreover, there is a lot that can be changed.

Today, the big Indian retailers have no approach outlined for vegetable farming. The vegetable markets need change and the ideal thing would be to have an Amul like set up, which can act as their saviour. Without that, the traders will dominate, even if the Wal-Marts were to step in. It is also necessary to bring about some rationality in crop patterns, crop rotations and other practices. If big retail can bring about ‘contract’ farming, change will happen.
If the retailers take up this issue and things improve, Agricultural Produce Market Committee can be done away with. There is no need for such a primitive market mechanism. World over, auction centres for vegetables provide cold storage facilities and they are not simply rolled on the ground, like it is done in India. If that is achieved, perhaps it will lead to evening out of vegetable prices round the year.

The other blunder that India’s retailers have made is not making any investments in post harvest businesses. There is an enormous investment required in all the stages of farming, including downstream processing units to handle the unsalable vegetables.

FDI can be channelled for that purpose: in the farm, at processing stage, for transportation and at the market place. The other big change that can come about with entry of foreign names is easy credit from banks. Bank finance will open up for firang names. Today, Indian companies do not get money for agriculture from banks.
And for the farmers and customers too, there are benefits in the long term. The farmer will take time to realise that better techniques can actually help him. Yes, job losses can happen if the farmer wisens up and uses more mechanisation. Job losses in the farm can be offset by job gains in the post harvest sector.
FDI will also provide an exit opportunity for the Indian business that have already invested in retail.  The changing practices of handling produce from farm to fork will make sure that the customer then will get better products. However, he may not gain anything in price.




5 years ago

The India govt is 99.9% corrupt and only look for bribes thru middle men. One solution to make good use of their money is make them fund all education, food, clothing, transport for the 500 million poor indian they rob and let them keep the ill gotten wealth. This way @least they can make good use of it. Or else it will lie overseas for ever. God bless them all.


5 years ago

Indian PM, Manmohan Singh is an EHM (Economic Hit Man), trained and manipulated by USA. He will be FIRM as per his master's instructions and will not even bother about things. Sonoa Rajiv work for some other country (may be China) and smaller politicians like Pranab, Chidambaram, Pawar gangs work for Indian corporates. NO ONE FOR INDIAN PEOPLE. My worry is, to divert the attention, the intelligence agencies may start the bomb blasts again.

pinakin mamtora

5 years ago

Why is our PM 'FIRM' on matters that are positive for the USA? Many years back, he was FIRM on the Nuclear Bill. Today, he is FIRM on FDI in retail. When will he be a MAN by being FIRM on enacting a REAL Lokpal Bill as suggested by Team Anna?

Shiv Kumar

5 years ago

I fully agree with the writer. For instance, D-Mart seems to have changed its business model for sourcing fruits and vegetables after struggling with rotten inventory.

Now it has outsourced this business to a company called Mani's who is a wholesaler based at the Navi Mumbai APMC. The quality of supplies has improved now and after pegging prices at a small premium to the neighboring vegetable vendor, there is parity in prices.

With good packaging and refrigeration available within the premises, one is assured of good quality even late in the afternoon.



In Reply to Shiv Kumar 5 years ago

so, mani is the middleman, which brings us back to square one...
the ultimate solution is amul approach.
in punjab, many farmers fed up of middlemen take their produce in tractors & sell it at a common place & customers love it!!!

Shiv Kumar

In Reply to param 5 years ago

Over time one would expect companies like Mani to emerge as last mile supplier while integrating the back-end. This is an evolving market and the traditional lalaji-type middle-men would be pushed out as a few layers in the distribution chain get erased.


In Reply to Shiv Kumar 5 years ago

sorry, i still disagree with the relevance of ONE extra middleman. this role is supposed to be played by the retail player with his intelligence, infrastructure & money. producer sells to one layer & customer buys from that layer. one can have multiple players at that layer, but if they are creating more layers, that's bad.
in this case, why not have Mani open his doors to allow customers to buy from him instead?

SAIL consortium may invest Rs375 crore in Afghan mines

Apart from SAIL, NMDC, Rashtriya Ispat Nigam, JSW Steel, Jindal Steel & Power, JSW Ispat and Monnet Ispat are the members of the consortium

State-run Steel Authority of India (SAIL)-led consortium is likely to make an initial investment of Rs375 crore for detailed exploration of three iron ore mines bagged at Hajigak in Afghanistan.

"The consortium will have to first establish the reserves through a detailed exploration. Around Rs 375 crore investment is needed for that. The decision on putting up a steel plant will be taken only after satisfactory outcome of the detailed exploration," sources in the know said.

A consortium of seven Indian steel makers, both public and private, led by SAIL bagged the development rights to mine in three iron ore blocks - B, C and D - at Hajigak in the Central Bamiyan province of Afghanistan.

"The Hajigak iron ore deposits consists of four blocks – A, B, C & D. The estimated iron ore reserves is approx. 484, 930 and 357 million tonnes in A, B & C blocks respectively while D block has small reserves," SAIL said in a statement.

The fourth block has been given to a Canadian firm, Kilo Gold Company. Hajigak mines, located across the Hindu Kush Mountains, between Bamyan and Maidan Wardak provinces, are known for its rich source of iron ore.

The source said that though the consortium members do not raise any doubt on the authenticity of the estimates, as per the industry practice, they will carry out the detailed exploration themselves before putting in more funds on mines.

"After gauging the estimated reserves, consortium members will decide on putting up a steel plant in Afghanistan. But, nothing has been finalised on it as yet, simply because that is not possible until one is sure about reserves," he said.
"The setting up of the steel plant will also depend upon the outcome of the techno-feasibility study on the proposed plant," he added.

However, at the same time, he said that the members were keen on setting up a steel plant in Afghanistan as the country is in need of huge quantity of steel for sprucing up its beleagured infrastructure.

Apart from SAIL, NMDC, Rashtriya Ispat Nigam, JSW Steel, Jindal Steel & Power, JSW Ispat and Monnet Ispat are the members of the consortium.
In the late afternoon, SAIL was trading at around Rs80.60 per share on the Bombay Stock Exchange, 4.10% down from the previous close.


ConAgra buys 3.67% more in Agro Tech

ConAgra will continue to work with Agro Tech's management team to expand its business and investment in India

Consumer food products marketer Agro Tech Foods (ATFL) said US-based processed food major ConAgra Foods had increased its stake in the company by 3.67% for Rs 51.82 crore.

"ConAgra Foods has bought 8,93,465 shares [3.67%] of Agro Tech Foods Ltd from a third party for a price of Rs51.82 crore," ATFL said in a statement.

ConAgra earlier held 48.11% stake, or 1,17,23,154 shares, in AFTL -- owners of refined oil brand Sundrop, it added. After the additional stake purchase, its holding will go up to 51.77%.

"Expanding our international business is a key part of our strategic plan and India represents an attractive growth market for ConAgra Foods," ConAgra Foods Chief executive officer Gary Rodkin said.

ConAgra will continue to work with Agro Tech's management team to expand its business and investment in India, he added.

ATFL is in the business of marketing food and food ingredients to consumers and institutional customers. The company has also expanded its brand portfolio to products such as Sundrop peanut butter and Act II popcorn among others.
ConAgra Foods is one of North America's leading food companies, with brands like Banquet, Orville Redenbacher's, Peter Pan, Reddi-wip, Slim Jim, Snack Pack, etc.

In the late afternoon, AFTL was trading at around Rs414.50 per share on the Bombay Stock Exchange, 1.09% up from the previous close.


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