Even as the government is yet to receive its first FDI proposal in multi-brand retail a good 12 months after it eased investment rules,the foreign fund inflow trend in the agriculture services sector heralds good news.
Investments in agricultural services,which includes cold-storage and warehousing,is widely seen as a front-runner to the investment opportunities that could open up as and when big-box retail makes an entry into India.
During 2012-13,the agriculture services sector received over four times the investment inflows during each of the preceding two years.
Much of this was reported to be in the second half of the year and has been attributed to the potential back-end opportunities that could open up once foreign retailers as and when global chains such as Walmart,Carrefour and Tesco decide to enter India.
Under current rules,FDI up to 100 per cent under the automatic route is permitted in cold-storage and warehousing. While no proposal for FDI in multi-brand retail trading has been received by the government,the investment into the agricultural services segment is very encouraging. The trend,even before investments in multi-brand retail FDI have started coming in,is heartening and bears out the potential of the sector as an avenue for generating additional employment opportunities, a government official involved in the exercise said.
In August this year,the government amended some of the conditionalities imposed under the FDI policy on multi brand retail trading,primarily to ensure that retailers holding back their investments on account of concerns about regressive rules,enter the country.
For instance,medium enterprises and farmers/agri cooperatives have been included under the sourcing requirement and the size of the small and medium enterprises is to be reckoned only at the stage of first engagement with a retailer. Also,the 50 per cent requirement of investment in back-end infrastructure has been limited to the first tranche of $100 million.
The decision on location of the retail stores has also been left to the state governments rather than restricting it to cities with a population of 10 lakh or more. These changes have been made taking into consideration the concerns of potential investors as well as domestic stakeholders and should make the difference, an official said.
Overall,the country received FDI worth Rs 70 crore in the agriculture sector during the April-June quarter of the current fiscal. In the Twelfth Five Year Plan (2012-17), the inflows were Rs 875 crore in 2012-13,and Rs 70 crore up to June in the current fiscal. During the entire Eleventh Plan period (2007-12),the inflows amounted to Rs 6,612 crore.
The investments were made in development and production of seed and planting material,horticulture and nursery services,agriculture machinery,plant protection services,cattle breeding and livestock rearing,apart from cold storage and warehousing.
India is the worlds largest producer of fruits and vegetables,has the largest area under wheat,rice and cotton and is the second-largest producer of rice and wheat. However,India loses about Rs 50,000 crore worth of agricultural produce annually on account of frail post-harvest infrastructure.