FDI in Food & Agriculture by Pani Panchayat & Organic Farmers’ Study Group

FDI in Food & Agriculture

by Pani Panchayat &

Organic Farmers’ Study Group

Pani Panchayat | Organic Farmers’ Study Group Page 1 of 2716 Feb 2012

1. Farmers’ Expectations (3)

2. Claims about FDI (4)

3. Strengths of Global Retailers (14) 4. Global Retailers’ Target (15)

5. Farmers’ Disappointment (16) 6. Adverse Effect Of FDI (17) 7. Experts’ Opinion (25) 8. Our Opinion (26)


Inside Stuff

Farmers’ Expectations


• Infrastructure like Water, Electricity, Roads• Market assurance• Remunerative rates• Freedom from marketing hassles• Risk coverage against natural uncertainty• Technical back-up in some cases• Quick and assured payment• Soft loan for capital investment in farm• Advance for purchase of inputs

Claims about FDI1. More price for producers 2. Prosperity for producers3. Middle man/chain elimination4. Lesser price for consumers 5. Assured market for producers6. Lesser wastage7. New employment generation8. Improved infrastructure9. May led to growth in export


Claim #1: More price for producers

Bulk buying, huge capital, better management & networking will give the Retailers bargaining power. Obviously it will not give “More” price to producers.Example:

In India milk & its products are retailed by cooperatives, 60% goes to the producers & 40% to the retailers. In USA, its exactly reverse.


Claim #2: Prosperity for producers

• If claim #1 proves wrong, that obviously there will not be any prosperity for producers.• Something which our government could not achieve in last 65 years, its expected that outside retailers will do, as if they are magicians !!Example:

EU and USA subsidizes their farmers to about USD 400 billion, i.e. over INR 5000 crores per day. Is that economic growth?


Claim #3: Middle man/chain elimination

Middle man will not be eliminated, only its type will change. New middle man will be more costlier. Retailer is the biggest middleman, who earns maximum profit.Example:

There is no middle-man in Indian sugar industry, still farmers are not benefited inspite of government support.


Claim #4: Lesser price for consumers • Huge investment, advanced technology, higher overheads & operating costs, cost of storage will need more energy. So price to consumer will go up. • They can absorb initial losses, to make sure current Retail system is non-functional. And then will have monopoly to exploit the market.Example: % market share of organized retailers

Sweden: 86, Germany: 75, Belgium: 79, Australia: 78, Canada: 69, UK: 60, France: 65, Mexico: 70, Thailand (within last 10 years) : 40


Claim #5: Assured market for producers

Retailers are allowed to import 70% of goods. So to reduce cost, they will import most of the items from anywhere in the world (like from China, Bangladesh, Indonesia) and Indian producers market will be lost.

Example:

USA more than 40% jobs in manufacturing sector were lost in 30 years.


Claim #6: Lesser wastage


• To advocate for FDI, Government has claimed wastages of 35-40% in fruits-vegetables & 10-12% grains which is highly exaggerated. No authority has claimed / taken ownership of this claim.

• Present system decentralized, whereas the newer system will be centralized. So wastages might be more.

Claim #7: New employment generation

• Present Walmart Sales = Rs 21.1 lakh crore • Present Walmart Employees = 15 lakh• Indian retail market = 10.8 lakh crore• Walmart employment for India = 7.7 lakh But present employment in Indian retail is approx 4 crore. India would be a nation of sales boys and sales girls. Lakhs will be employed, and crores will be lost !!


Claim #8: Improved infrastructure

• Are the Retailers going to create new roads, generate electricity, produce water? NO !!• Retailers will invest in Supply Chain upgradation like transport, warehouse, cold-storages etc. • But basic resources like electricity, road network used will be existing one. It will put more strain on scare resources.


Claim #9: May led to growth in export• Retailers have tendency to use usual suppliers (cheapest) which lead to increased imports.• We may become dumping ground to goods manufactured in China, Indonesia etc.• No chance of increasing export, but certainly increase in import.• Even if export increases, it will be at cost of scarcity for deprived class.


Strengths of Global Retailers

• Huge capital• Advanced technology• Lean management• Solid networking• Infrastructure: Storage & Transport• Improved Supply Chain• Experience


Global Retailers’ Target

The strengths will be utilized by Retailers to:a.establish brand by sustaining initial lossesb.break current retailer systemc.make people used to their brandd.source agro produce at lowest pricee.sell at highest price after the current retail system is non-functionalf.get maximum profit with

minimum man-powerPani Panchayat | Organic Farmers’ Study Group Page 15 of 2716 Feb 2012

Farmers’ Disappointment• Infrastructure like Water, Electricity, Roads• Market assurance• Remunerative rates• Freedom from marketing hassles• Risk coverage against natural uncertainty• Technical back-up in some cases• Quick and assured payment• Soft loan for capital investment in farm• Advance for purchase of inputsNot just disappointment, there will be more adverse effects …


Adverse effects of FDI


1. Increase in global warming & carbon foot print

2. Increased Mono Culture3. Increased Food Miles4. Increased GM food5. Stringent selection procedure6. Agriculture will become more non-viable &

non-sustaining7. Increased urban migration

Adverse Effect #1

Global warming & carbon footprint

Large air conditioned stores, extended cold storage chains, the conversion of consumers from raw foods to packaged foods and high consumer commuting all contribute to high carbon emission.

CO2Pani Panchayat | Organic Farmers’ Study Group Page 18 of 2716 Feb 2012

Adverse Effect #2

Increased Mono Culture

Retailers will seek bulk volumes of same type of agro product, it will obviously lead to mono-culture and loss of biodiversity, resulting in poor soil fertility.


Adverse Effect #3

Increased Food Miles

Retailer will buy cheaper sources irrespective of the distance. For example Rice might be imported from China. But not necessarily will that variety suit and be good for Indian health.


Adverse Effect #4Increased GM food

1. GM is against the principles of Organic Farming.

2. There will be adverse effect on Natural resources by GM.

3. Import from outside may be GM food

4. GM food is not good for health.


Adverse Effect #5

Stringent Selection procedure

Retailers will prefer and procure only A grade material, but in agro products that might not be the case all the time. So Grade B or C material may go waste, without any buyers.


Adverse Effect #6

Agriculture will become more non-viable & non-sustainingPresently Indian Agriculture is non-viable & non-

sustainable due to various reasons.

FDI will add more fuel to this, and led to worse conditions.


Adverse Effect #7

Increased urban migration

Due to increase in risk and non-viability in agriculture, farmers will be left with no choice but to sell the land and also migrate to cities for livelihood.


Experts’ Opinion

“Whether the FDI is a good thing or a bad thing depends on what kind of investment is tethered. Quite often it's a good thing, sometimes it's not.”

Professor Amartya Sen on FDINobel Prize winner 1998, Economic Sciencein an interview to NDTV


Our Opinion“Considering the diversity in geography, climate, cropping, land holding, soil, cultivation, food habits, cultural, social etc in India, FDI will not be suitable.

Chances are History may repeat itself, just that East India Company will be replaced by Walmart etc.

So FDI will be win for retailers and loss for us.”

Pani Panchayat Organic Farmers’ Study Group

[email protected]


Jai Hind


[email protected]

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FDI in Food & Agriculture by Pani Panchayat & Organic Farmers’ Study Group

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