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FDI in practice

More choices,better prices,Punjab farmers call it a ‘win-win’

Written by Amrita Chaudhry | Malerkotla |
December 7, 2011 1:19:54 am

The Opposition protests and the Congress’s and its allies’ own contradictions may force the government to put the plan for 51 per cent FDI in multi-brand retail on hold. The Indian Express looks at four examples of FDI entering the market as cash-and-carry wholesalers (in which 100 per cent FDI is allowed),building a loyal clientele and winning over sceptics

Companies offer farmers training,conduct soil-testing,and give advice on seeds,pesticides

Devinder Singh grows vegetables on two acres of his 13-acre farm. Each morning he loads up his crate with cauliflowers and beetroots,before a tempo arrives to take his produce to the collection centre of a private company situated half a kilometre away. By late morning the rest of his produce heads to the local mandi.

Singh says he is happy. “I enjoy the choice. The company picks up the produce right from my doorstep. This helps me save the time that would have gone into ferrying the produce to the mandi and saves me the fuel cost. It goes without saying that the companies pay us better prices than what we get in the mandi.”

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The number of private companies,national and multinational,buying agriculture produce in this region is huge — the Birlas,Tatas,Bharti Walmart,Metro,Reliance,they are all here. Most of them buy the produce from the mandis,but Bharti Walmart goes directly to the farmers.

Before the entry of private companies,a farmer would go to the local mandi where his product would be bought by a middleman,bidding for a heap. In practice,most farmers get tied up with a single middleman and the relationship can last generations. In many cases,farmers also take loans from these middlemen and spend years paying off the same.

Mohammad Nazeer too grows vegetables on his six acres. He claims his three-year association with Bharti Walmart has helped him increase his family income by around 15 per cent annually. “Apart from a good assured price,these companies also offer us incentives like good produce bonus and so on. Moreover,thanks to the training programmes held by these companies each month,small farmers like me have understood the need of using pesticides efficiently. This in turn has helped us save money by reducing the amount of pesticide used,” Nazeer says.

Abdul Majid,29,is the lead farmer for a private company. “I supply my own produce and also help other farmers do the same. My family owns a mere one acre of land but now when we have a choice… we take land on lease and grow more


Says Arvind Kumar,Manager,Bharti Walmart: “These farmers are under no contract to supply to us. But we hold regular training programmes,advise them on new seeds,pesticides and even agronomic practices. We have also created cards for farmers who come to us where we record each and every detail of a cropping season. This helps farmers know what they earned at the end of the year. Apart from this soil testing is also done by the company. All this brings farmers back to us again and again.”

Mohamad Hanif agrees. Along with brother Mohammad Anwar,he grows mint,methi,spinach,cauliflower,raddish,beetroot etc. He hopes the companies buying from them can train them to grow “exotic crops such as coloured pepper and small radish,which will help us get more price in the market”. Hanif also hopes other companies start buying from them directly like Bharti Walmart.

Ajay Jhakhar of the Bharat Krishak Samaj says companies getting into the picture is a “win-win for both big and small farmers and consumers”. “We are not against middlemen or small traders and businessmen. But farmers should get the right price for their produce and the companies should ensure that they pick up 75 per cent of the agriculture produce right from the doorstep of farmers,” Jhakhar says.

Kolkata: In Mamata’s backyard,gaining ground

About a 10-minute drive from the Trinamool Congress headquarters stands Kolkata and West Bengal’s only Metro Cash and Carry — a Germany-based B2B (business to business) group. Set up under the Left Front regime and continuing under the current Trinamool government,this outlet is a success story with an increasing clientele and consumer base.

It caters to a large section,from wholesalers and petty traders to societies,neighbourhoods and distant households who find it convenient to shop in groups from here. They come to buy everything from rice to TV sets,from flour to fresh meat.

In their 70s,a couple from Salt Lake admitted coming to the Metro outlet at least once a month. Pushing their shopping trolley towards the parking lot,they said: “The outlet provides a price difference and quality is assured.”

Asked about the company’s B2B format that restricts customers to those with a trade licence or a society registration or other specifications like a minimum Rs 1,000 purchase,the couple said: “There are ways you can fulfil these criteria and still shop for your home. The grocery bill for most middle-class homes crosses Rs 1,000. Plus,anyone carrying a trade licence can bring in another. So it multiplies.”

There are others there who are evidently domestic,individual consumers. Unwilling to be identified,they said: “There are hundreds of societies who get trade licences done for Metro outlets.”

What is clear is the popularity of the store and the willingness of many to bend rules to get in. “The deterrents have restricted the business of Metro Cash and Carry. Given a free run,it would have catered to a bigger clientele,” said one


The Left,which is now opposing FDI in multi-brand retail,had seen opposition from within to the Metro Cash and Carry plan. Apart from the Trinamool,which has single-handedly blocked the retail FDI,the Left’s own allies had tried to stall the store from coming in. However then chief minister Buddhadeb Bhattacharjee had intervened to ensure that the German major was given the licence to trade,with conditions and with a rider that the company may never enter the retail market.

Udyana Guha,a Forward Bloc MLA who is believed to have played a crucial role in ensuring Metro’s smooth run,says their opposition to FDI in retail stands,

though “we know that Metro is doing good business here”.

Trying to justify the Metro store in Kolkata despite the Trinamool’s vociferous opposition to FDI in retail,Arup Roy,the current Agriculture Marketing Minister,said: “Even though Metro Cash and Carry is an FDI,we know it has generated employment in the locality. But we have also seen that due to this company,some of the local vegetable vendors are affected. We do not have problems if they operate without affecting interests of the small traders.” At the same time,he added: “The licence was given by the former LF government. We will examine all aspects when the time for its renewal comes.”

Incidentally,the several hundred local registered market committees from which Metro procures agro-products and other food items say their collections have risen as they are paid higher than what they were getting from middlemen. The money goes directly to the account of farmers. The rice distress sale is a case in point. At a time when farmers are committing suicide in Burdwan over distress sale of paddy,those tied with the Metro Cash and Carry have got a good price,said a senior CPM district committee member in Burdwan.

Lucknow: A world under one roof

Having come up just a month and a half ago,Best Price Modern Wholesale located on the outskirts of Lucknow already has got itself a loyal customer base. A cash-and-carry facility,it is a 50:50 joint venture between Bharti Enterprises and Walmart and is one of 14 such stores across seven states of

the country.

Spread over four acres,the B2B store caters to small retailers,offices and institutions as well as restaurants,hotels and other catering ventures and clubs. Except for

staff and registered customers,no one is allowed inside.

Best Price opened its first store in May 2009 in Amritsar,and has since set shop in Zirakpur (a satellite town of Chandigarh),Jalandhar,Ludhiana,Kota,Bhopal,Indore,Raipur,Meerut,Agra,Jammu,Vijaywada,Guntur and Lucknow.

The Lucknow store stocks a range of around 5,000 articles,from food and grocery items to fast moving consumer goods and electronic items. “More than 90 per cent of the goods are Made in India,” said an official spokesperson of Bharti Walmart Private Ltd,based in Gurgaon.

The vegetables and perishables are sourced from the local Lucknow mandi. “While in Punjab and Haryana,we are able to purchase directly from the farmers,Lucknow being a new venture,we are still buying from the local market,” said the spokesperson. “But soon,if the state law permits,

we will venture into direct purchase from

the farmers.”

The store has over 180 employees,mostly from Lucknow and nearby areas. Having left his home and job in Rae Bareli to work for Best Price in Lucknow,one of the employees said the store offered him a better salary.

“The best thing about the place is that it has everything you can think of under one roof at a reasonable price and you can be rest assured about the quality,” said S P Singh,a stock verifier with the Indian Railways based in Lucknow.

“The store offers a transparent system of purchase,with appropriate price,and we do not have to talk to dealers of various companies for different products,” said R K Bajpai,who is in the transport business. He adds that contrary to fears that such stores would sell foreign goods,the Lucknow store offers common Indian products.

Bangalore: 8 years and going strong

Metro Cash and Carry first set up shop in Bangalore in 2003 with two stores,in Yeshwantpur and on Kanakapura Road. These were wholesale self-service centres,catering to kirana stores,businesses and corporates,restaurants,hotels and the like.

Initially,wholesalers reported lower sales and accused the giant of undercutting prices. Others argued that contrary to stipulation that it was a B2B arrangement,the products sold at Metro could be bought for household consumption by any businessman with a sales tax receipt. With stores in 30 countries and one lakh employees on its payroll,they added,Metro could afford to take losses and run its centres like army canteens just to establish itself in India.

Eight years later,such voices seem to have ebbed. Arun K,a retailer from Marathahalli,Bangalore,who has been shopping at the Yeshwantpur outlet for three years now,says Metro has hiked his profit margins by 15-20 per cent. Arun sells groceries,hosiery and stationery out of a small shop in a residential colony. “As in any wholesale shop,you have to buy items in bulk at Metro. As long as they have this rule and insist on checking membership cards,we retailers are safe,” he says.

Supermarkets like Reliance and Spencer’s that have sprung up in his neighbourhood haven’t dented his clientele,he adds. “They have stock management problems and they sell stale goods.”

Metro Cash and Carry now has eight large distribution centres across India,the newest ones came up in Ludhiana and Borivali,Mumbai,in September and November respectively. It is looking to invest Rs 2,400 crore in 30-40 stores in the country in the next four years.

Delhi: Deals,deals,deals

At Carrefour SA wholesale store in Seelampur in Delhi’s underbelly,shopping carts roll out of the sliding glass doors constantly,pushed by men men and women taking away everything from coke cans and Haldiram snacks,to papayas and coffee mugs. Posters all around the store offer deals,including payment via EMI,as well as a 3 per cent cashback for shopping at the outlet six times a month and spending a minimum Rs 1,000 on each trip.

The world’s second-largest retailer first entered the Indian market in January this year with this outlet,and recently opened another cash and carry in Jaipur. It has also entered into an alliance with Future Group that operates Big Bazaar.

The Seelampur outlet is located in the hub of Delhi’s wholesale trade,with Sadar Bazaar,Krishna Nagar,Gandhi Nagar and Chandni Chowk nearby,and if the French retail giant was aiming to co-opt kirana stores as its clientele,it appears to be getting there.

Y K Gulati is among those loading snacks and a set of coffee mugs he found on sale on his vehicle with wife Saroj. The retired couple help their son run a kirana store. A year ago,they took Carrefour membership and now make at least three trips a month,though they still go to the traditional wholesale markets in Jheel to stock up.

“On certain things,they have great deals. But we still like to compare prices,” Gulati said. A cauliflower that is selling outside for Rs 15 per kg,for example,was priced at Rs 8 per kg at Carrefour.

The low prices do attract the individual customers as well,among them software engineer Dhiraj,who stood waiting at the registration counter. “I am sure they will have some way of letting me in,” he hoped.

Intently looking at a chart comparing the MRPs with what Carrefour was offering,a couple said: “We just came to see if we can buy from here. But they are saying we can’t as they need a licence and other documents,proof that we own some business.”

While their experience with Carrefour has been good,the Gulatis are not too sure about FDI in retail. “If they allow FDI in retail,the kirana stores,the small shops will go away… A whole culture of neighbourhood bazaars will die,” say the couple.

— Madhuparna Das in Kolkata,Surbhi Khyati in Lucknow,V Shoba in Bangalore and Chinki Sinha in Delhi

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