Leaving farmers to reap the bitter harvest

Devinder Sharma
January 19, 2014

A day after Parliament approved foreign direct investment in multi-brand retail in December 2012, a newspaper report highlighted how a big retail company was exploiting both the farmers as well as the consumers: the wholesale cash-n-carry Bharti-Walmart enterprise, the report said, was buying baby corn from contract growers in Punjab at Rs. 8 per kg, selling it in wholesale at Rs. 100/kg and finally the consumers were paying Rs. 200/kg. In other words, farmers were getting only 4% of the end price consumers paid.

So to say that private enterprise will save Indian agriculture is all bunkum. Take the case of paddy in Bihar, the only state to have repealed the Agriculture Produce Marketing Committee (APMC) Act way back in 2006, thereby allowing farmers the freedom to sell their produce to whomsoever they like. Against the procurement price of `1,310 per quintal of paddy that Punjab farmers got this year, Bihar farmers have managed to sell paddy at something around `800-900 per quintal. This is nothing but a distress price/sale, a classic example of the ruthless exploitation by private traders.

Ironically, the Commission for Agricultural Costs and Prices (CACP), which is supposed to ensure remunerative prices to farmers, lists Bihar as the top ‘market-friendly’ state as far as agriculture is concerned. Punjab, which has a network of mandis and provides an assured price to farmers, is at the bottom of the chart. At a time when being market-friendly is the new mantra, the CACP is asking Punjab to disband the APMC Act and allow markets to operate freely. In other words, it wants Punjab farmers to go the Bihar way.

So when Rahul Gandhi asked the Congress chief ministers to exempt fruits and vegetables, which have contributed much to raging food inflation, from the APMC Act by January 15, I thought he had gone by what FICCI/CII have been campaigning for. What probably he has never been told is that only about 30% of India’s farmers get the benefit of procurement prices. The rest 70% are in any case dependent on the markets. If the markets were so helpful to these 70% farmers, I am sure by now the farmers in Punjab and Haryana would have demanded the repeal of the APMC Act.

But that hasn’t happened. The APMC Act, despite all its flaws, provides an assured price and market to farmers. It is primarily for this reason that Punjab farmers are refusing to diversify from wheat and rice cultivation in the absence of an assured price mechanism for other crops. This year, Madhya Pradesh is expected to take over Punjab in wheat production. It will manage to achieve this only because farmers have been given a bonus above the procurement price and thankfully have not been left to the mercies of unscrupulous private traders.

I am amused when some economists blame the APMC for the monopolistic market structure that restricts the entry of free trade and competition, thereby denying farmers an economic price for their produce. This is a wrong assumption. Under the APMC Act, farmers bring produce to the designated mandis where private traders are first allowed to make purchases. It’s only when there are no buyers left that the Food Corporation of India (FCI) or the State procurement agencies step in to lift whatever is available at the minimum support price.

This is what irks the private trade. It doesn’t want to pay the minimum support price to farmers. For example, if it can get paddy at `800-900 per quintal in Bihar, why should it shell out `1,310 per quintal in Punjab?

To say that our present market structure does not permit the entry of new players who want to invest in other infrastructure is wrong. In seven years after repealing the APMC Act, Bihar has seen no revolution in agricultural marketing. Farmers have been left in the lurch and the private trade has not made any investments. The clamour to do away with the APMC Act is primarily to pave the way for setting up terminal markets for the big agribusiness companies as well as for multi-brand retail.

Devinder Sharma is a food policy analyst.
The views expressed by the author are personal

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Made in the United States



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AT RISK: A kirana store trader at Banjara Hills in Hyderabad. Photo: P.V. Sivakumar
AT RISK: A kirana store trader at Banjara Hills in Hyderabad. Photo: P.V. Sivakumar

India has buckled to outside pressure by allowing in the multinational retailer — the only beneficiary of this move

For U.S. President Barack Obama there could be nothing more cheering. The ‘underachiever’ now goes to the presidential polls with a lot of confidence — India’s decision to open up FDI in multi-brand retail comes as a shot in the arm for the beleaguered American economy and will obviously boost his poll prospects.

Mr. Obama certainly knows what is good for the U.S. economy; Prime Minister Manmohan Singh also knows what is in America’s interest. Mr. Obama, for instance, wanted to stop outsourcing to protect U.S. jobs. No amount of persuasion from India changed his mind. Similarly, knowing how important FDI in retail is for him, he had pitched for a new wave of economic reforms. It was surprising to see Mr. Obama telling India what is good for us.

Aided and abetted by TIME magazine and credit rating agencies like Standard&Poor’s, Fitch and Moody’s, India finally buckled under global pressure. What is little known is that India was also under a G-20 obligation to remove all hurdles to the growth of multi-brand retail.

But is FDI in retail really good for India? Will it improve rural infrastructure, reduce wastage of agricultural produce, and enable farmers to get a better price for their crops? While a lot has been said and written about the virtues of big retail, let me make an attempt to answer some of the big claims.

Agriculture: The Prime Minister has repeatedly projected FDI in retail as a boon for agriculture. Unfortunately, this is not true. Even in the U.S., big retail has not helped farmers — it is federal support that makes agriculture profitable. In its last Farm Bill in 2008, the U.S. made a provision of $307 billion for agriculture for the next five years. .

Where is the justification for such massive support if big retail was providing farmers better prices? And let us not forget, despite these subsidies studies have shown that one farmer in Europe quits agriculture every minute.

The second argument is that big retail will squeeze out middleman and therefore provide a better price to farmers. This is again not borne by facts. In the U.S., some studies have shown that the net income of farmers has come down from 70 per cent in the early 20th century to less than four per cent in 2005.

This is because big retail actually brings in a new battery of middlemen — quality controller, standardiser, certification agency, processor, packaging consultants etc. It is these middlemen who walk away with the profits and the farmer is left to survive on the subsidy dole.

Monopolistic power enables these companies to go in for predatory pricing. Empirical studies have shown that consumer prices in supermarkets in Latin America, Africa and Asia have remained higher than the open market by 20 to 30 per cent.

And finally, the argument that multi-brand retail will provide adequate scientific storage and thereby save millions of tonnes of food grains from rotting. I don’t know where in the world big retail has provided backend grain storage facilities?

FDI is already allowed in storage, and no investment has come in. Let it also be known that even the 30-per-cent local sourcing clause for single-brand retail has already been challenged and quietly put in cold storage by the Ministry of Commerce.

Employment: The Indian retail market is estimated to be around $400 billion with more than 12 million retailers employing 40 million people. Ironically, Wal-Mart’s turnover is also around $420 billion, but it employs only 2.1 million people. If Wal-Mart can achieve the same turnover with hardly a fraction of the workforce employed by the Indian retail sector, how do we expect big retail to create jobs? It is the Indian retail sector which is a much bigger employer, and big retail will only destroy millions of livelihoods.

State government’s prerogative: Very cleverly, the Central government has allowed the State governments the final say in allowing FDI in retail. This may to some extent pacify those State governments opposed to big retail. However, the industry is upbeat and knows well that as per international trade norms, member countries have to provide national treatment. Being a signatory to Bilateral Investment promotion and Protection Agreements (BIPAs), India has to provide national treatment to the investors. Agreements with more than 70 countries have already been signed. State governments will, therefore, have to open up for big retail. Industries will use the legal option to force the States to comply.

And more importantly, let us look at how the virus of big retail spreads, even if the promise is to keep it confined to major cities. Recently, a New York Timesexpose showed how Wal-Mart had captured nearly 50 per cent of Mexico’s retail market in 10 years. What is important here is that as per the NYTdisclosure “the Mexican subsidiary of Wal-Mart, which opened 431 stores in 2011, had paid bribes and an internal enquiry into the matter has been suppressed at corporate headquarters in Arkansas”.

In India, we are aware that Wal-Mart alone had spent Rs.52 crore in two years to lobby, as per a disclosure statement made in the U.S. It has certainly paid off.

(Devinder Sharma is a noted food and agricultural policy analyst.)

Notice to Bharti-Walmart, Bharti Retail over suit on FDI violation

American retail giant Walmart and its Indian joint venture partner Bharti Enterprises came under scrutiny today over a public interest suit that alleged violation of multi-brand trade norms. Currently, Foreign Direct Investment (FDI) is not allowed in multi-brand retail.
The Delhi High Court sought replies of the Centre, Bharti-Walmart and Bharti Retail on a plea for a probe against the firms for allegedly carrying out retail trading in the multi-brand sector in violation of India’s existing FDI policy. The court issued notices on the basis of the suit filed by environmental activist Vandana Shiva.
It says Bharti-Walmart is illegally carrying out multi-brand retail trade despite being permitted only to carry out wholesale cash-and-carry, or wholesale trade in the country.
The PIL said: “This instant case seeks to expose how many established Indian companies are actually fronting for foreign trading companies that have partnered with them for setting up companies in India for the purpose of carrying on trade, so as to give the foreign partner majority control and economic interest in the Indian retail sector, thereby circumventing the FDI prohibition of multi-product trading in the retail sector.”
Senior lawyer Pinky Anand, representing Shiva, while speaking to Business Standard, alleged Bharti Walmart was believed to be directly or indirectly carrying out multi-brand retail business in India even as it did not have the permission for it. She further alleged Easyday stores were indirectly being run by the joint venture between Walmart and Bharti.
“We have neither seen the petition nor received any notice from any court,” a Bharti -almart spokesperson said in a statement. A spokesperson of the Bharti group, which runs Easy Day stores, said: “We haven’t received any such notice and would therefore be unable to offer any comment.”
Bharti-Walmart is a 50-50 joint venture formed in 2007, and it operates cash-and-carry, or wholesale outlets in India. Walmart is waiting to open supermarket stores across India once FDI rules of the country permit multi-brand retailing.
Currently, Bharti-Walmart runs 17 cash-and-carry stores in India, where 100 per cent FDI is permitted.
Bharti Retail, a wholly-owned subsidiary of Bharti Enterprises, operates 187 neighbourhood stores under the Easyday brand.
Walmart provides back-end support for these stores, as that is permitted under the FDI guidelines. While the first Best Price Modern Wholesale, Bharti-Walmart cash-and-carry store, was opened in 2009, Easyday made its debut in 2008.
It is learnt that once FDI is allowed in multi-brand retail, the Easyday stores may be run by Bharti-Walmart.
The petition, referring to a response received under the Right to Information Act, said the Department of Industrial Policy and Promotion had not granted any licence to Bharti or Walmart or any other company to set up Easyday stores in India.
“Union of India permitted FDI only in the cash-and-carry wholesale sector in India, without implementing appropriate checks to ensure that such companies are not able to intrude the multi brand retail sector,” it said.

Indian PM Manmohan Singh knows what is good for America. He will soon allow FDI in retail, Mr Obama.

Devinder Sharma

There is something in India’s decision making that I can never understand. For over a year, intense discussions have followed the proposals under the upcoming National Food Security Act. The Plan A included provisions of 35 kg of subsidised foodgrains per family for the below the poverty line (BPL) category and allowing those above the poverty line (APL) an entitlement of 15 kg at a relatively higher prices.

Feeding the hungry by providing them legal entitlements comes at a time when policy makers remained glued to opening up for FDI in retail. Amidst the continuing debate whether FDI in retail is good for India or not, US President Barack Obama throws his weight pitching for a new wave of economic reforms. After the TIME magazine came out with a cover story calling Prime Minister Manmohan Singh ‘underachiever’ (which ostensibly was to provoke the PM to go in for FDI in retail), it was surprising to see President Obama telling India what is good for us.

But then, President Obama knows what is in America’s interests. He stopped outsourcing (even if it hit Indian companies) of jobs because he wanted to protect US jobs. And now since he goes into elections with nothing to show, he is actually banking upon India to bail him out of the terrible economic crisis that he is faced with back home. Manmohan Singh has therefore deputed Commerce Minister Anand Sharma to go around and build up a political climate in favour of FDI in retail. No one is surprised when Anand Sharma says that the opposition to multi-brand retail is less intense now (See the lead story in Economic Times, July 16, 2012 http://articles.economictimes.indiatimes.com/2012-07-18/news/32730673_1_russian-economic-entities-russia-s-sistema-investments).

Any sensible economist, and for that matter any nationalist, would ensure that the hungry in India are first well fed. What may appear to be a welfare activity, and is supported by government subsidies, also makes terrible economic sense. Feeding the hungry millions, on a water footing, is a sure recipe to an inclusive growth. I had thus expected the Indian PM to pitch in for an early implementation (and not wait for the 2014 elections) of the National Food Security Act. A news report in Indian Express (Food Bill: Govt looking at flexible plan, may exclude 33 % population; link – http://www.indianexpress.com/news/food-bill-govt-looking-at-flexible-plan-may-exclude-33-population/976392/) tells us that an alternative proposal is now being drafted, which will lower the food entitlement from 35 kg to 25 kg per family, and also do away with the two categories — BPL (priority) and APL (general).

I don’t understand how can the Plan B (as it is called) envisage an additional expenditure of only Rs 7,000 crore over and above the Rs 1.11 lakh crore of legally binding food subsidy? It should be much lower considering that 33 per cent of the population stands excluded, and the legal entitlement has been reduced for bulk of the hungry population. Nevertheless, jugglery with figures is something that the government regularly indulges in to keep the nation misinformed for all times to come. We as a nation rarely question the figures that are doled out to us.

I thought the Prime Minister would know what is crucial for India. Feeding the nation, and that too after we failed for 65 years, should be the sole priority. However, he doesn’t mind excluding the percentage of population to be fed, by 33 per cent but has focused all his energies to bail out President Obama instead. he knows that by allowing FDI in retail he is actually going to add on to hunger by displacing lakhs of people working in the local stores. Such a magnitude of displacement will only add on to growing hunger.

But then, we are aware that Manmohan Singh knows what is good for America.

Feeding the hungry is not the only area where Indian Prime Minister is least interested. He would have given a damn to food security if it were not for the UPA President Sonia Gandhi’s insistence. Earlier too, if you recall, when MNREGA was launched, Manmohan Singh, and the then Finance Minister P Chidambaram, had strongly opposed the move. If it were not for Sonia Gandhi, the poor unemployed wouldn’t have got any relief in the form of a guaranteed employment even if it is only for 100 days.

Manmohan Singh is not the only bureaucrat-turned-politician who feels, and works for the American interests. Besides the ambitious-looking bureaucrats (who crave to join MNCs after they exit government service), economists and management consultants are of course on the payrolls. But what about the Indian media? Why is the Indian media playing to the American tune? Well, I don’t have to explain it to you. You know it much better. It is all about money, my dear. Who cares for the hungry?

Posted By Devinder Sharma to Ground Reality at 7/19/2012 02:05:00 PM

No therapy in retail: Vandana Siva

The entry of big corporations into the food chain pushes up retail costs and decreases the share of the farmer.
Last Modified: 06 Jan 2012 13:46
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As a commodity, food is divorced from its sources – the seeds, the soil, the farmer [EPA]

New Delhi, India – In November 2011, when the UPA government announced that it had cleared the entry of big retail chains such as Walmart and Tesco into India through 51 per cent Foreign Direct Investment (FDI) in multi-brand retail, it justified the decision saying that FDI in retail would boost food security and benefit farmers’ livelihoods.

But the assurance that FDI in retail would ease inflation did not resolve the political crisis the government was facing; it deepened it. Parliament was stalled for several days of the Winter Session, after which the government was forced to withdraw its decision.

The story of FDI in retail goes back to 2005, when Prime Minister Manmohan Singh signed an agriculture agreement with the US, along with the nuclear agreement. On the board of the US-India Knowledge Initiative in Agriculture, as it is called, sit Monsanto (the world’s leading producer of GM seeds), ConAgra (among the world’s biggest agribusinesses, along with Cargill) and Walmart (the world’s largest retail giant).

Protests had prevented Walmart’s entry into retail, but, in 2007, it did get a backdoor entry through a joint-venture with Bharti (their stores go by the names of Easyday and Best Price Modern Wholesale). No back-end infrastructure has been built so far, one of the other claims of the government about why we need retail giants.

Industrialisation means hungerThe way the UPA government tried to ram through the decision on FDI in retail – without consulting the opposition parties, or even its allies – was clearly undemocratic. But the decision itself was also flawed. It illustrated a disconnect between an ideology based on market fundamentalism – which is the leaning of the present government – and the Indian reality of small farms and small retail.

There is also a disconnect between that ideology with its code word of “reform”, and the crisis that market fundamentalism is facing – worldwide, as well as in India. If anything needs reform, it is the failed paradigm of corporate globalisation.

Firstly, rising prices are driven by the commodification of food and speculation on food commodities. Industrialisation and globalisation of food and agriculture has transformed food from a source of life into a commodity, and as a commodity, food is divorced from its sources – the seeds, the soil, the farmer – and from its end use as nourishment for our bodies.

Industrialisation of agriculture and the commodification of food is justified on grounds of producing more food and reducing hunger. However, industrial agriculture wastes and destroys resources – the soil, the water, the biodiversity – produce food. The book American Wasteland by Jonathan Bloom reveals that the US wastes 50 per cent of the $925bn of food it grows each year.

Industrialisation of food also degrades and denitrifies food. We, therefore, have a dual malnutrition crisis – the crisis faced by one billion people who do not get access to food, and another two billion who have access to industrial food, but not to healthy food, and so suffer from food-related diseases such as obesity, diabetes and hypertension.

Industrialisation thus creates hunger. And by increasing the costs of production, it creates a negative economy, locking farmers and food producers into debt. In the “Third World”, debt translates into hunger. Hunger is also created by the commodification of food. The industrial model of food production is producing commodities, not food. More commodities do not mean less hunger, but more. And when food becomes a commodity, it becomes an object of speculation for profits, robbing the poor of their entitlements.

Big corporations, big retail costs

As a commodity, it does not matter what food is used for. Food can be transformed into feed for animals in factory farms, or into fuel to run cars. Seventy per cent of the food grain in the US is used to feed animals, 30 per cent to feed cars. The proposed increase through FDI will take this to 40 per cent, creating a conflict between feed and fuel, and pitting both against food. This diversion of food to feed and fuel competes with the food needs of the poor. It creates food scarcity and contributes to the rise in food prices.

When food is treated as a commodity, it does not matter how it is produced – whether GM seeds were used or not, whether it is produced chemically or organically. But how food is produced does determine what happens to our soil, biodiversity and water; it also determines whether farmers live or die. And how food is produced determines whether what we eat nourishes our bodies or contributes to disease and ill-health.

The entry of big corporations into the food chain polarises prices, decreasing the share of the farmer and increasing the retail costs.

When food is a commodity, it becomes the object of speculation. Putting food on the global casino table takes food away from people’s kitchens and plates.

Secondly, the entry of big corporations into the food chain polarises prices, decreasing the share of the farmer and increasing the retail costs. This polarisation of prices is structural; corporations make their profits through vertical integration and controlling the entire food chain.

They buy cheap from farmers and sell at high cost when they have a monopoly. The control of big retail over the food system has brought down the farmers’ share to as little as two per cent. Before liberalisation, the difference between wholesale prices and retail prices was a mere six per cent.

No need for a middle man

After the removal of quantitative restrictions, which opened up India to dumping of subsidised products, wholesale prices started to go down while retail prices continued to climb. The entry of retail giants will further push wholesale prices down, without taming the price rises. It is not the number of middlemen that matters, but the size of a middleman. A giant retailer is a giant middleman.

It might be a single player, but it harvests super profits at the cost of society. That is how the Walton family, which owns Walmart, owns $100bn of personal wealth – equivalent to the combined wealth of the bottom 30 per cent of US society. You do not accumulate that kind of money by paying farmers higher prices and bringing consumers cheaper products. Walmart and Tesco are not friends of farmers, as is being projected by the government and corporate spokesmen.

The Financial Times said on November 28, 2011: “A consolidated retail sector would require consolidated agriculture to supply.” Consolidation means concentration, concentration means displacement of small farmers, destruction of small farmers means deepening both the food crisis and the agrarian crisis.

Big retail means big agribusiness.

About 250,000 farmers have already committed suicide in India since 1997 because of increasing monopolies on seeds and chemicals, rising costs of inputs and deepening debt. Big retail will uproot small farmers, as it has done worldwide. India’s future cannot be “retail dictatorship” and “seed dictatorship”. It has to be “retail democracy” and “food democracy”, based on small retail and small farms.

Dr Vandana Shiva is a physicist, eco-feminist, philosopher, activist and author of more than 20 books and 500 papers. She is the founder of the Research Foundation for Science, Technology and Ecology, and has campaigned for biodiversity, conservation and farmers’ rights, winning the Right Livelihood Award [Alternative Nobel Prize] in 1993.

The views expressed in this article are the author’s own and do not necessarily represent the editorial policy of Al Jazeera.

‘Don’t sell false promises’ in the name of FDI in retail sector


Interview with Vijay Jawandhia, a leading farm activist in Vidharbha.

Vijaya Jawandhia: “FDI not a solution to farmers’ issues”.


VIJAY JAWANDHIA is a leading farm activist in the Vidarbha region. He is one of the founder members of the Shetkari Sanghatana and of the Kisan Co-ordination Committee, an organisation of Indian farmers. He has worked ceaselessly for the welfare of farmers and is best known for his unrelenting documentation of farmers’ suicides and his efforts to bring the issue to the government’s attention. He spoke to Frontline about his views on FDI.

“Do you remember 1991 – the [hype about] free market, economic liberalisation and all that? That was a dream with great promises at that time, wasn’t it? And has that dream come true? No. In the same way this dream of FDI with all its promises will also not come true. Yes, backward linkages, transportation, infrastructure, cold storage – all that will be good, but the dream will not come true. And that is because the free market has failed. Farmers continue to kill themselves. In fact, after the loan waiver of Rs.71,000 crore, the number of farmers committing suicide is three and a half times more than before the waiver. And FDI will only make the situation worse.

“In two decades we have created a super India – this super India may need the Walmarts of the world, but it is only 10 per cent of the population of the country. The rest of the population lives in Bharat. All I want to tell the Prime Minister is this – ‘Don’t sell us a false dream.’ I can understand the hopes of farmers when they are promised backward linkages, but I can prove that this is also a dream that will not come true. This year potato farmers in West Bengal and U.P. [Uttar Pradesh] stored their harvest in cold storage. If you sell at harvest time, you get less because of the abundance, so they sold some and kept some for a later date. Now they are trying to sell, but they are getting only Rs.2 a kilogram, and that does not even cover the cost of keeping it in cold storage. Note that the production is high, but the absorption by the market is low. Overproduction in India will always make prices drop because the majority of people cannot afford food. So overproduction and infrastructure may not be the answers to problems of Indian agriculture.

“Super India is also just 10 per cent of the population, and FDI in retail will cover only this percentage because these giant stores are only viable in cities with a population of 10 lakh or more. Since this is the case, how will 90 per cent of agriculture benefit from FDI, as is being claimed? How will they get a good price? Ten per cent of the people in the country have purchasing power and 90 per cent cannot afford two square meals a day. How is a farmer going to get a good price in such a scenario? Nobody is answering these questions. And if farming is such a viable enterprise, then why are U.S. and European farmers so heavily subsidised? Again I say to the Prime Minister, please don’t sell your ideas with false promises. Yashwant Sinha, our former Finance Minister, recalled how FDI was allowed in food procuring, and none of the expected returns has come to the country.

“Today we are being told that FDI is needed because the rupee is depreciating. It was around Rs.43 to the dollar in March. Now it is Rs.50. They say if there is more supply of dollars to India the rupee will become stronger. But explain this to me. As soon as it seemed that FDI would go through, the rupee rose to Rs.52 against the dollar. Why? If it is to get stronger with more foreign money coming in, why did it suddenly depreciate?

“This has its effect on cotton too. If the rupee gets strong then [the price of] cotton drops. The price of a pound of cotton lint was $2.43 around March, but as the rupee got stronger it dropped to 99 cents today. But has the price of cloth or the price of a cotton shirt that is sold at Walmart come down? No, nowhere in the world has this happened. Cotton farmers get no protection. They suffer the exploitation of the market. U.S. farmers are protected, but here farmers have no alternative but suicide. Call it economic support or call it subsidies – we need it here. The free market is under-carpeting the real issues.

U.S. and China have given subsidies of $5 to $6 billion. The World Bank and the International Monetary Fund criticise subsidies in farming, education and health, but have nothing to say to pay revisions under the Sixth Pay Commission. The idea is to encourage people to purchase consumer goods – keep them happy with higher salaries so that they have a good purchasing power, while the rest of Bharat is supposed to stay happy with rice at Rs.2 a kilo. Nothing wrong with that if you make a 50 per cent cut in salaries revised under the Sixth Pay Commission. Agriculture cannot survive without state support. This is seen worldwide. U.S. and European farmers would collapse without state help. We need support, especially for non-irrigated agriculture. Farmers realise that FDI is a bogey and the BJP [Bharatiya Janata Party] is also opposing it, but what is their stand on the agriculture policy in general? They never opposed the Commission for Agricultural Cost and Price. Basmati was sold last year at Rs.3,000 a quintal. It went for Rs.1,600 this year because the export market has fallen owing to recession in the West.

“We are squeezing our farmers. So, again I say to the Prime Minister, FDI is no solution to farmer’s issues. All that is happening is that we are dividing India into two countries – super India and another India that has the status of a Somalia or an Ethiopia. Dr M.S. Swaminathan has also said that the growth of agriculture should be measured by how much the income of a farmer increases and not by how much the produce increases.

“It is a myth that big farmers in India want FDI. We have no big farm ers. In the U.S., a small farmer is someone who has 40 acres (16 hectares). Here we have a law that says you cannot own more than 54 acres of non-irrigated land and no more than 18 acres of irrigated land. So where is the big farmer here? A farmer is someone who gets all his income from farming. If this definition is accepted then it is impossible to be a big farmer in India… they would always be in debt because land is a liability! Take the income of a farmer in Punjab, which is the region with the highest yield area. His net annual income will be three to four lakh [rupees]. That is Rs.25,000 a month. So where is the big farmer? A graduate joining a call centre gets that as a first salary. The so-called big farmers are those who have incomes other than just land. That is why I say, put an income tax on agricultural income. Balram Jakhar and Prakash Singh Badal are not farmers.

As told to Lyla Bavadam

Sustained resistance to FDI in retail sector



Left parties and farmer organisations play crucial roles in the opposition to FDI in multi-brand retail trade.


At a wholesale cash-and-carry store of Bharti Walmart at Nidamanuru near Vijayawada. The NDA government had allowed FDI in wholesale trading. The Left does not accept that FDI in retail will bring down inflation because in organised retail, prices are always raised to maintain profits when sales drop.

THE decision of the United Progressive Alliance (UPA) government to roll back its proposal to bring in foreign direct investment (FDI) in the multi-brand retail sector is attributable to several factors, which include the consistent and sustained opposition by the Left parties. In 2005, when there were attempts to resurrect the idea, following unsuccessful moves to push it by the previous government, the Left submitted a note to the UPA on the issue and registered its strong objections, following which the matter was held in abeyance. The Left parties felt the issue had been settled when, in 2009, the Parliamentary Standing Committee on Commerce, without a single dissent note, rejected the idea of giving permission to FDI in retail. But it was not to be.

The Left does not view the attempted and repeated bulldozing by the government as a stand-alone exercise. It sees this as a continuation of the strategic alliance that began with the signing of the India-United States nuclear deal and the visit of the Prime Minister to the U.S. “The Manmohan Singh government has been trying to introduce FDI in retail for the past six years, since 2005, when the strategic alliance with the United States was firmed up with his visit to Washington. One of the most important issues for the U.S. has been the entry of its companies into retail trade in India,” said Prakash Karat, general secretary, Communist Party of India (Marxist).

He said that all the claims to justify FDI in retail were false. There were already 40 million people employed in the retail trade and the reality was that in the absence of any other employment opportunities, people took to petty trade. The entry of giant retail chains, he said, would end up displacing lakhs of small shopkeepers and traders. “According to our estimate, one Walmart supermarket can displace over 1,300 small retail stores and render 3,900 people jobless. For every job created in a supermarket, around 17 jobs would be lost in the unorganised retail sector.”

The second argument, that it will tame inflation, was also an absurd one, he said. The sharp rise in global food prices since 2007 was attributable to speculative trading and an increase in control by multinational companies on the food chain. Everywhere, the experience was that wherever there was big, organised retail trade, prices were raised in order to maintain profits whenever sales dropped.

Karat said that the modern storage facilities that were being talked about would be for the benefit of the retail giants and not for the country as a whole. International experience showed that once giant retail chains established themselves, they dictated terms to farmers and producers. They set various conditions, because of which farmers and producers became captive to retail chains in the absence of alternative buyers. Karat blamed the National Democratic Alliance (NDA) for starting the whole process by allowing FDI in wholesale trading.

Interestingly, this was one issue that brought farmer and trader organisations on the same platform. The Confederation of All India Traders (CAIT), led by Praveen Khandelwal, called for an all-India traders’ bandh on December 1, which was largely successful.

Several farmer organisations such as the All India Kisan Sabha (AIKS) and the Kisan Sabha, which is affiliated to the Communist Party of India (CPI), warned the government that any move to bring in FDI in multi-brand retail would jeopardise the livelihoods of millions of farmers and small, unorganised retailers. The AIKS pointed out how retail giants and seed monopolies such as Walmart, Monsanto, Cargill, Archer Midland, and ITC had been dictating government policies in agriculture. It said that the move was as much against the peasantry as it was against small retailers. “The government allowed middlemen entry and now they expect the giant retail chains to ensure proper price. Even with a minimum support price for 25 grain varieties, there is no procurement mechanism. Private traders procure at very low rates. We cannot expect companies like Walmart to give farmers good rates,” said Vijoo Krishnan, on behalf of the AIKS.

Agricultural extension services had been outsourced, too, he said, and the experience of contract farming showed that there were drastic shifts in cropping patterns that would ultimately impact food security. Proposed laws such as the Seeds Bill and the Pesticides Management Bill were prime examples of the way in which monopolies were being encouraged in the name of quality and data exclusivity. “It is an admission of the failure of the government that it has not been able to control losses. It could have controlled this through agro-processing with cooperatives involving large sections of the peasantry,” he said. A shift from something as innocuous as paddy cultivation to aquaculture might end up displacing hundreds of labourers, Vijoo Krishnan said. He felt that as there was a glut in production, especially of items like dairy products in the developed bloc, it was quite possible that giant retailers were interested only in finding a market.


PRAKASH KARAT, GENERAL secretary of the CPI(M), displaying the party’s publication “Oppose FDI in Retail, Defend Indian Livelihoods” at its launch at a press conference in New Delhi on December 6.

Atul Kumar Anjan, general secretary of the Kisan Sabha and a leader of the CPI, told Frontline that he was not very confident of the rollback decision being a permanent one. “Remember, it was the BJP [Bharatiya Janata Party] that brought it in the Rajya Sabha, giving the same arguments of boosting jobs, etc. They voted alongside the Congress on the India-U.S. nuclear deal. It was because of the crisis within the UPA itself that the rollback happened,” he said.

The government had done little to benefit farmers, he said. The lifting of controls on fertilizers had caused prices to reach unaffordable levels. The Ministry of Agriculture should be rechristened as the Ministry of Agriculture and Farmers’ Welfare, he said. Interestingly, even the Bharatiya Krishak Samaj, the farmers’ outfit owing allegiance to the ruling party, had offered only conditional support to FDI in retail.

Kavita Kuruganti, national convener of the Alliance for Sustainable and Holistic Agriculture, told Frontline that all the organisations represented by her alliance were against the government’s FDI proposal. “It is a model that has not benefited traders or farmers anywhere. Even in contract farming where there were tripartite agreements and State governments had entered as third parties, farmers did not get the rates they were promised,” she said.

In a separate statement, the central secretariat of the CPI expressed concern at the obstinacy shown by the Central government on the issue. It said that instead of taking corrective measures in an economy that was already in crisis, with all the eight basic sectors facing a slowdown, fiscal deficit soaring and inflation rising, the government was opting for a course that would ruin the lives of over a million retail traders.

Hazards in food security

“The entry of MNCs like Walmart will ruin the livelihoods of over a million retailers and also adversely affect the small and medium farmers as the retail MNCs will not only determine the purchasing prices but also attempt at changing the crop patterns. It may lead to serious hazards in ensuring food security to our people. Jobs are being offered to Americans by snatching jobs from Indians. The government is trying to hoodwink the gullible by claiming that the MNCs have to procure 30 per cent of goods from medium level I factories. The decision is not India-specific and MNCs can procure even this 30 per cent from anywhere in the world. This will ruin our small-scale industries that are already in crisis due to double dip global recession,” it said.

It also demanded a review of the earlier decision to allow 100 per cent FDI in single-brand retail trade as well as “cash and carry projects” as they too were harming small-scale industrial units.

In a statement issued by its Polit Bureau, the CPI(M) noted that the government appeared more eager to meet the demands of the U.S. and other Western governments and serve the interests of MNCs such as Walmart, Tesco and Carrefour rather than protect those of its own people. The conditions imposed by the government were insignificant and meaningless. So was the investment floor laid down in the proposal. The giant retailers were all multibillion dollar companies.

“The restriction of foreign retail outlets to cities with over 10 lakh people is also meaningless because those are precisely the places where the MNCs want to go to tap the lucrative segment of the market. The big cities are also where small retailers are mostly concentrated,” the statement read.

“Ninety five per cent of the 1.2 crore shops were run by self-employed persons, each on an area less than 500 square feet. These small shopkeepers in the urban areas are going to be hit the hardest with the entry of the MNC retailers. International experience shows that supermarkets everywhere invariably displace small retailers. Small retail has been virtually wiped out in the developed countries like the U.S. and in Europe. South-East Asian countries had to also impose stringent zoning and licensing regulations in order to restrict the growth of supermarkets, after small retailers were getting displaced,” it said.

International experience also showed that procurement by MNC retailers never benefited small farmers. Allowing MNCs to procure was an attempt by the government to whittle down its own procurement responsibilities, it said.

In addition, small manufacturers would get squeezed and predatory pricing by MNCs would eliminate competition and establish their control over the supply of a range of commodities, including essentials such as food items. The domestic market would get flooded with goods procured from foreign countries. The claim that this would bring down retail prices for consumers was utterly bogus, it said. Instead, greater monopoly power and storage capacity for the big corporates will promote hoarding and profiteering.

The statement pointed out that the MNCs involved in cash-and-carry trade in India, permitted earlier by the government, had routinely violated the prohibition of selling directly to consumers. The regulatory measures based on a system of self-regulation were bound to be ineffectual as there was no mechanism to ensure enforcement.

For the moment, the issue of FDI in retail seems to have been settled. However, shocked reactions from the corporate sector and much of the mainstream media show that the battle is far from over. Definitely, the coming together of the opposition on this issue has been a relief to both the small and medium farmers and the trader community.