Krishi Desh

For Bharat and Bharati

Archive for December, 2011

How FDI in Retail can ruin Bharatiy Farmers

Posted by संदीप नारायण शेळके on December 30, 2011


Source

… In 1970, hog producers received 48 cents of each dollar spent on pork. in 2000 they received only 12 cents. Prices to consumer did not decrease.

… In 1990 ranchers and farmers received 60 cents of the dollar spent on beef, retailers received 32.5 and meat companies 7.5 cents. In 2009 Farmers received 42.5cent (down by 17.5), retailers 49 cents, meat packers 8.5cents. ..

… 4 pints of milk in UK costs 1.45 pounds and farmer receives 40%(58 pence) of it. Causing a loss of 3 pence per 4 pints. Causing small farmers to close there shops. In Bharat farmer receives 75% of consumer spend on a litre of milk. …

… US farmers received direct commodity subsidies of over $167 Bn in 1995-2010. EU paid farmers direct subsidies of $51 Bn in 2010 alone. So why these big retailers are not helping reduce the subsidies to the farmers. …

…. In Mexico 25% of small farmers are off farming now due to big retail and imports under NAFTA. ….

As mentioned in image above in Europe flow of goods from 3.2 million farmers is controlled by 110 buying desks of big retailers catering to 160 million consumers. Today Bharat has more than 600 million (78% 0f  total farmer population)  small and marginal farmers and a huge consumer base of more than a billion. Now imagine what havoc it may create when our small and marginal farmers will have to compete with bigger farmers of developed nation who fetch huge subsidies from their governments.

32 Lakh European farmers received total subsidy of Rs 26,970 Crores i.e. average Rs 8,41,680 per head approx. Now 21 Crore Bharatiy farmers received total subsidy of nearly Rs. 1,54,000 Crores i.e. average Rs 19,494 per head approx. Now if tomorrow these retail giants start importing (using free trade agreement) from foreign farmers since the prices would much lesser with the help of their governments where would Bharatiy farmer go?

How can Bharatiy farmer compete with rival farmers,
– when basic infrastructure is not in place?
– when rival farmers receive subsidies almost triple the yearly turnover of Bharatiy farmers?
– when crop insurance is not in place?

I’m afraid that such uneven and misplaced competition would lead our farmers off their land into labors jobs since they do not have enough capital and supporting government.

On other hand that farmer’s income will be improved argument fails sharply since even after having established big retailers network the USA and EU is consistently increasing the subsidies to the farmers and still their farmers are into losses. What is the guarantee that FDI in multi-brand retail won’t displace Bharatiy farmers? and put pressure on government to increase the subsidies too?

Lastly, lets not blindly copy paste western models. We can definitely learn from them but by looking evenly at all sides and not just one which is shiny.

Jai Bharat!

Related article: FDI in Retail – A macro analysis, Impact of Foreign MNCs on Bharatiy Agriculture, and Death Knell into the Coffin of Biggest Enterprises Network

Find out yourself Subsidies given in USA

Posted in Agriculture of Bharat, Bharat, Farmer's Suicides, Politics in Agriculture | Tagged: , , , , , , , , | 1 Comment »

Bharat remains dirtiest country: Jairam Ramesh

Posted by संदीप नारायण शेळके on December 29, 2011


Rural Minister Shri J Ramesh said “Bharat remains dirtiest country”

“In one area in which India can claim success in the social sector is education. We can’t say same thing in health, we can’t say same thing in nutrition, we certainly can’t say the same thing in sanitation because we do remain the dirtiest and filthiest country,”

….

“I am concerned. The biggest challenge I am facing, as a rural development minister, is to educate people about sanitation. 60 per cent of all open defecation in the world are in India.”

When I read this article I remembered Shri Jairam Ramesh’s party’s Yuvraj Shri Rahul’s statement “I’m ashamed of being Bharatiy”.

As per my understanding I think these are deliberate attempts by the Congress party people to distract the attention from key issues that we face today. Congress has been leading the governments in the country for more than 53 years now, and still they talk such language which certainly is not improving their image either.

There can be following possibilities behind such use of language and making such outrageous statements:

  1. Distracting public attention from mis-governance:

    Congress has this tendency to make haywire statements, create debate and discussions around it and then distract the public attention from scams, mis-governance and policy paralysis. E.g. They gave much hype to Anna Hazare led IAC movement and easily put the 2G, CWG, Adarsh scams out of the sight. Then now they are talking about FDI in retail all of a sudden and almost all alleged persons got bail in 2G case since CBI did not oppose. So it seeks that this is a precedent they use to distract.

  2. They are seriously concerned about sorrow state of nation.

    It may be possible they are very concerned about nation and the issues we face. But then if they are concerned then who is stopping them from punishing the corrupt, decentralizing the power. They are free to implement such small measures on war front. But they look like preacher alone and not practicers.

  3. They lack the understanding of basic needs of rural area.

    If we accept that they want a hygienic and healthy society, then I respect and support their views. But case is different, have they asked the rural people what they want? Did rural people ask you for mobile phones? Did they ask you toilets? Answer is “NO”.

    Then why are they looking to setup toilets in rural area and whats wrong in it.

    There is possibility that they are driven by international WHO and UN commitments to provide sanitation in the rural area at any cost. But they miss the point here that in rural area due farming ecology there is consistent need of fertilizers and if fertilizers are organic then its the best. Now if farmer decided to use his manure in his farms as fertilizer then what is wrong in it? Its scientifically proven than human and cattle waste is best organic fertilizer after de-composition. And soil has the ability to decompose the extracts. So i ask the question to Mr. Ramesh “Do we need to use toilets forcibly? Or do we need better roads, storage facilities, processing units, transparent markets?

  4. Internal power crisis:

    These leaders are not naive or idiots. They have their studies in place, adequate information is always with them. Them why are they using such outrageous language? It may be an attempt to destabilize the current office bearers by maligning their image and controlling the power center. This is one such thought which always takes rounds of my mind when I think about current power seeking tribe.

Kautilya’s says:

“What is beneficial for subjects is beneficial for king”,

“Aanvikshiki is lamp of all sciences” and

“Connect with people whenever possible, else coterie around you will engulf you and your people”

जय भारत!

Posted in Bharat, History, Politics, Thoughts | Tagged: , , , | 1 Comment »

Looks like first victim of central govt’s onion policy

Posted by संदीप नारायण शेळके on December 22, 2011


Shri Sahebrao Kekan from Chandawad, Nasik attempted suicide today. He is an onion grower, had onion crop at 10 acres. Due to idiotic export policy by central govt the onion farmer across Maharashtra faced huge losses this year. This year has been an epitome of loss for onion growers.
Looks like the fate of cotton growers awaiting onion growers due to indifferent govt. Vidarbha cotton farmers are committing suicide at rapid rate. And now western Maharashtra onion farmers too are being forced towards suicide through some insane pricing and neo-open market policies. And this world is just playing the role Nero’s guests.

 

Jai Bharat!

Posted in Bharat | Tagged: , , , | Leave a Comment »

FDI in Retail – A macro analysis

Posted by संदीप नारायण शेळके on December 7, 2011


I’ve tried to understand the terminologies and  impact of FDI and Retail. Finally added my view too.

What is Retail business?

As per the Delhi high court decision in 2004 the term ‘retail’ is defined as ‘a sale for last consumption’ and not for further sale. i.e. A sale to the end consumer. In general terms we can call it ‘Business to Consumer’ sales. Retail business is interface between the producer and the individual consumer buying for personal consumption. A retailer is the person who sell the goods to the individual consumer at a margin profit. Today the Retail contributes 15% of the economy and employs 8% of the total workforce (only agriculture employs more).

Retail industry is divided in two parts:

1. Organized Retailing: These are licensed retailed who are registered for sales tax, income tax, etc. E.g. Retail-chain, Hypermarkets, Supermarkets. Privately owned large retail businesses. This account for only 3-4% of total retail.

2. Unorganized Retailing: These are the traditional formats of low-cost retailing like Kirana stores. Owner runs the shop with the help of family. Nearly 97% of total retail.

What is FDI?

FDI is Foreign Direct Investment. It is an investment by a foreign company into other country than origin. This investment can be done through acquisition of local company or establishing a new business operation. That means it is the capital/funds inflow from foreign entities invested in allowed segments/sectors.

FDI in Bharat is governed by the FDI policy announced by the Govt of Bharat and the provision of Foreign Exchange Management Act(FEMA) 1999. Ministry of Commerce and Industry, Govt of Bharat is the nodal agency for monitoring and reviewing the FDI policy on continued basis and changes in sectoral policy, sectoral equity cap. FDI in some sectors is open for foreign investors directly; where for some sectors they have to be approved by RBI or FIPB.

Who can invest through FDI?

A non-resident entity can invest in Bharat, as per FDI policy. Pakistan citizen or entity is not allowed. Bangladesh citizen or an entity can invest only under government route.

non-resident in Nepal and Bhutan as well as citizens of Nepal and Bhutan are permitted to invest in the capital of Bhratiy companies on repatriation basis. OCBs (overseas corporate bodies) can invest through Government route as per FDI policy and approval from Bharat Government; and with prior RBI approval for investment through Automatic route.

Where FDI can be invested?

Any Bharatiy company can issue capital against FDI.

FDI in Partnership Firm/Proprietary Concern:

1. An non-resident Bharatiy or person of Bharatiy origin is not allowed to invest in a firm or proprietorship concern engaged in any agricultural/plantation activity or real estate business or print media.

2. Investment can be on non-repatriation basis.

FDI in Venture Capital Fund:

1. non-resident entity with FIPB can invest in a domestic VCF set up as trust.

2. If VCF is incorporated under the Companies Act then non-resident entity can invest in such VCF under Automatic route of FDI Scheme.

FDI in Limited Liability Partnerships:

1. FDI can invest in LLPs operating in sectors/activities where 100% FDI is allowed as per FDI policy. Through govt approval route, automatic route and where there are no FDI-linked performance conditions

2. FDI is not allowed in agriculture/plantation activities, print media, real estate business.

What does mean by FDI in Retail?

Currently:

1. FDI upto 51% in single brand retail store with prior govt approval.

2. FDI upto 100% for cash and carry wholesale trading and export under automatic route.

3. FDI is not allowed in multi brand retail sector retail segment.

 As per the recent developments and reports: The cabinet of Government of Bharat has approved 51% FDI in multi-brand retail. Also FDI ceiling for single brand retail is increased to 100% from current 51%.

State of Retail Business in Bharat today:

Organized retail is just 3% of total trade in Bharat today. Whereas organized retail sector in developed economies makes over 70-80% of total trade. Even in the Asian developing economies these figures are around 20-25% of total trade.

There are more than 1.2 Crore retail outlets operating in Bharat and only 4% of them operate in larger than 500 square feet in size. There were 11 retail outlets per 1000 people in 2001 as per the estimates of AC Neilsen and KSA Technopak.

Pros:

1. It will cut the middleman and help farmers get more price and consumers less cost.

2. Prices will be brought down at retail level to tame inflation.

3. Big retail chains will invest in supply chains which will cut wastage, estimated at 40% in case of fruits and vegetables.

4. SMEs will have bigger market, along with better technology.

5. It will bring in much needed foreign technology with global best-practices.

6.It will create more employment than displacing people of small stores.

7. It will induce better competition in the market, benefiting both produces and consumers.

8. Franchising opportunities for local entrepreneurs.

Cons:

1. It will lead to closure of tens of thousands of small retail stores.

2. Which may endanger livelihood of 4 crore people.

3. It may tame inflation initially but will fuel the inflation once MNC companies get a stronghold in retail.

4. Farmers may be given lucrative prices initially, but eventually they will be at the mercy of big retailers.

5. SMEs will become victims of predatory pricing policies of big retailers.

6. It will replace ordinary middleman with sophisticated corporate middleman.

7. Create cultural and ecological problems by twisting the food production and availability as per the profit margin.

8. It will promote cartels and creating monopoly.

My Views:

As per the statistics 15% i.e. around $401 bn of the GDP today is generated by 40 million work force. Which means that the wealth is distributed among the larger section. If we look at the Wal-Mart revenue is about $300 bn generated by just 2.1 million workforce.

If we allow big retailers to take over retail segment without proper regulations and fair competition then the larger amount of money will be concentrated with few business houses leading to poverty.

If the problem is rural infrastructure then we should not be dependent on outsiders for our development. We must be self-reliant in the infrastructure related activities.

Government must make sure that commodity pricing, procurement, rural infrastructure, supply chains are in place to promote competition.

Big Retailers have the tendency to get into ‘contract farming’ for their needs. This will push farmers to produce what they demand in bulk. Certainly, if retail giant asks for particular sort of produce in large quantity then to make more profits more area will be cultivated for that particular crop. Now due to this scenario if food grains production goes down then wouldn’t there be a threat to our food security? And the farmer himself would be the buyer of the food grains.

Our strength lies in distributed and decentralized development, so in order to improve the life standard of last man of the strata its imperative to take development to every individual by strengthening the small enterprises.

FDI should be allowed there is no need of blanket ban on it, but with appropriate safeguards for strengthening economy to avoid employment and farming crisis like Brazil, Argentina, Thailand etc. [Read more]

Open for discussion and counter-views.

जय भारत!

Posted in Agro Business, Bharat, Politics, Thoughts | Tagged: , , , , , | 5 Comments »

 
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