Experts divided on benefits of FDI in retail to farmers

Agriculture experts seem divided on the issue of benefits to farmers from government's decision to allow foreign direct Investment (FDI) in multi brand retail in India.

Last Updated: Sep 17, 2012, 16:21 PM IST

New Delhi: Agriculture experts seem divided on the issue of benefits to farmers from government's decision to allow foreign direct Investment (FDI) in multi brand retail in India.

Planning Commission Member Abhijit Sen said the benefits of FDI in multi brand retail to the farmers needs to be analysed in the long run, while noted farm economist Y K Alagh said the move will be successful if it reaches the small farmers and artisan groups in the country.

Consortium of Indian Farmers Associations (CIFA) Secretary General P Chengal Reddy welcomed the move saying that it would help in raising the income of the farmers.

Agriculture expert Devinder Sharma felt this policy will only help the multi-national companies.

Explaining the dynamics of profit, Sen said that benefits to the farmers will increase if the demand increases.

"Whether FDI in multi brand retail will be able to perk up the demand needs to be analysed in the long and medium term," Sen said.

There have been initiatives in the retail sector relating to agricultural products, but so far farmers have not gained much from it, he added.

Echoing similar views, Alagh, who is a former union minister and Member, Planning Commission, said for the farm sector to grow, FDI in multi brand retail should target the demand in the big towns and not just the metros.

"This policy should target big towns, places which have a large customer base and has expanding incomes. Also at the same time there is an urgent need to reach out to the small farmers and artisan groups so that they are encouraged to produce more as well as ensure there is no wastage" he said.

Retail in farm sector needs to be strategically used like China, where the small producers are allowed to sell their products in large retail chains thus providing them a platform to showcase their talent and achievement, Alagh, who is presently Chairman of the Institute of Rural Management Anand, added.

Farmers' body CIFA has thanked the government for allowing 51 percent FDI in multi brand retail.

Reddy has also written to Prime Minister Manmohan Singh, saying farm sector growth was hampered due to lack of modern technologies, inadequate investments and restricted market policies.

"The FDI, which will enable investments in technology, will help 5 lakhs villages in having infrastructure, trained manpower and other facilities. This will enable contract farming, which provides assured price and also price discovery mechanism," he said in the letter.

Reddy said, among other things, the retail sector will help to introduce 1,000 varieties of Indian mangoes, lichis, bananas, clustered apple, BPT rice, Durram wheat to the global markets.

Reacting to the government's decision on allowing FDI in multi-brand retail, agriculture expert Devinder Sharma, however, criticised the move.

He cautioned it could provide an easy access to big multi nationals in controlling the market.

It will in no way help in uplifting the economic conditions of the farmers, Sharma said.

"Studies have shown in the US and Europe that despite the boom in the retail sector and growth of the food processing industry, the agricultural sector is one of the biggest recipients of subsidy by the government," he said.

For instance, in the 2008 Farm Bill in the US, the government had provided a farm subsidy of USD 308 billion, Sharma said adding there would not have been a need to provide such a huge subsidy had the farm retail sector in that country been so successful.

According to a study in the US, before 1950 a farmer used to earn 70 cents on every USD 1 product that he sold but after the retail revolution in 2005 this earnings skydived to just 4 cents, he added.

"These large companies might even replace the commission agents that exist in the Indian farm sector and the plight of the farmer could be worse with FDI in multi brand retail," Sharma said.