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Selling a fake dream

Devinder Sharma, October 1, 2012 22:42 IST

There is no evidence that big retail creates backend infrastructure. In the US and Europe, it has been done through govt support.

In the mid-1980s, Pepsico came up with a proposal to bring in the second horticultural revolution in Punjab. It was hailed as a path-breaking initiative that would put an end to the continuing distress on the farm. It was expected to usher in the latest technology, improve farm research and extension, create supply-chain infrastructure, and provide marketing linkages from farm to the fork. I remember the kind of excitement that prevailed all around. Politicians, bureaucrats, economists, agricultural scientists and even the Bhartiya Kisan Union (BKU) joined the chorus. All my efforts to reason out the hollowness of the claims, based on Pepsico’s own studies, were simply lost in the din and noise created by the drum beaters.

Some 15 years after the project was approved, Pepsico’s horticultural revolution is all but forgotten. Agriculture has gone from bad to worse. The food bowl of the country has also become a major hot spot for farmer suicides. While the soft drink giant remains busy marketing its colas, Pepsico has not been held accountable for its failed promises. It will never be punished for selling a fake dream to the beleaguered farming community.
Pepsico had promised to create 50,000 jobs. In response to a question in Parliament, it was revealed Pepsico had in reality created less than 500 jobs, including employing 250 unskilled workers.

It is now the turn of Wal-Mart and other big retail giants. FDI in retail is once again being projected as a panacea for all the ills plaguing Indian agriculture. FDI in retail will lay out backend infrastructure, bring in a chain of cold storages and improved transportation thereby reducing crop losses; remove middlemen which rob the farmers of profits, and thereby provide him higher prices; bring in improved technology to help in crop diversification; and of course, create millions of jobs.

Having spent Rs 52 crore in two years for lobbying alone, and after the recent New York Times exposure showing how Wal-Mart bribed its way to control 50 per cent of the retail market in Mexico, the Union cabinet finally allowed big retail to set shop.

We are being told that Wal-Mart, Tesco, Sainsbury, Carrefour and a host of other big retail players are expected to increase farm income. In the US, where Wal-Mart has completed 50 years, if farmers were getting a better income, there was no reason why the farming population should plummet to less than one per cent of the population.

Farmers in US survive on the farm not because of Wal-Mart but the massive subsidy support, which includes direct farm income. Between 1997 and 2008, Rs 12.60 lakh crore was provided as income support to farmers. A UNCTAD-India study shows that if these subsidies, classified as Green Box in WTO parlance, are removed, the American agriculture collapses.

Direct income support


In Europe, despite the dominance of big retail, every minute one farmer quits agriculture. Europe provides the highest amount of subsidies, including direct income support. But because 74 per cent of these subsidies are cornered by corporations and big farmers, small farmers are quitting farming. In France, farm income has come down by 39 per cent in 2009, down from 22 per cent in 2008. In OECD, the richest trading block comprising 30 countries, Rs 14 lakh crore was the farm subsidy support in 2009 alone. It is not big retail, but direct income support that keeps farmers in agriculture.

These subsidies also bring down the domestic and international prices as a result of which big retail sells cheap. Empirical studies show big retail charging 20-30 per cent higher than open market in Latin America and Southeast Asia. In India, organised domestic retail has not been able to sell cheaper. A Nabard study for Hyderabad shows Reliance Fresh and others charging 15-20 per cent higher prices.

There is no evidence that big retail creates backend infrastructure. In the US and Europe, rural infrastructure has been created through government support which came in the form of agricultural subsidies. To say that 40 per cent agricultural food that goes waste in India will be drastically reduced is also an illusion. In the US too, 40 per cent food is wasted and much of it is after processing where Wal-Mart’s should have played a much important role.

Regarding employment, for a $450 billion turnover, Wal-Mart employs only 2.1 million people. Whereas for an estimated $460 billion market, Indian retail employs 44 million people. Last month, massive demonstrations by Wal-Mart workers complaining of poor working conditions and exploitative salaries rocked the US. Who creates employment, and also provides better working conditions, therefore is all evident.

Yes, there is a need to improve rural infrastructure, provide a sophisticated supply chain, and provide better income to farmers. The milkman of India, late Dr Verghese Kurien, had shown us the way. The cooperative dairy structure, which led to the evolution of the Amul brand, is the right approach. If he could do it for milk, which is a highly perishable commodity, there is no reason why it can’t be replicated in fruits, vegetables and other agricultural commodities.

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