NAC member N C Saxena tells Sreelatha Menon the demand for commodities is so robust in metros that the retail sector can easily absorb the foreign competition.
Misgivings have been expressed about the likely impact of foreign direct investment (FDI) in retail. What do you think? Would it prove to be a disaster?
One should be rational and objective while considering the impact FDI in retail would have. And, one has to keep in mind the specific sectors —retail, farmers, the government or consumers.
Our retail sector is not about one or two shops. It runs into thousands. And, one Walmart in some corner of Delhi is not going to eliminate all these shops. The demand for commodities is so robust in metropolitan cities that the system can easily absorb the competition.
But investors would come in large numbers.
It is not so easy. Look at the challenges they face. Land prices are very high, and it is difficult to compete with the existing trade. The entrants are going to have a tough time, initially at least. They won’t make profits in the beginning.
But once they begin making profits, they have the capacity to push down the prices in the supply chain. I’m talking about the threat of predatory pricing.
They can make profits only if they charge less from consumers and pay more to suppliers, be they farmers or other manufacturers. Besides, they also have to pay all the taxes. They need to sell products by giving proper receipts, unlike the mom-and-pop stores that receive payments in cash, but need not pay taxes for everything they sell. There is no loss at all. I don’t know what the fuss is all about. They would create jobs and reduce margins. I don’t see anything wrong.
Why would companies want to pay farmers high prices? Wouldn’t these be here to benefit from the cheap goods available in villages?
But why would any farmer sell at low prices? It is in the interest of farmers to have more buyers.
True. But the experience of farmers with contract farming has not always been good.
It was not bad at all. Farmers around the metros were aware. They knew about contract farming when they got into it. When they realised a contract was harming them, they decided not to enter into one the following year. A company is as dependent on farmers as the latter is on buyers. So, companies have to agree to the terms of farmers if they want the produce.
Would mandis continue to exist once the big retailers buy directly?
Mandis are very oppressive. None benefit from these, but traders and politicians. So, retailers would have to come up with innovative models which help them secure things at a cheaper rate and, at the same time, lure farmers to patronise them. It has to be a win-win situation, or it won’t work.
Shouldn’t the Agricultural Produce Marketing Committee Act be amended and other similar reforms carried out before new challenges are brought before farmers?
Amendments are needed, but states might not go ahead with these. It does not mean one should not continue to provide competition among buyers, for it is to the advantage of all concerned. Aren’t Reliance and Big Bazaar functioning? These have not made people jobless.
So, is ignorance the reason behind political opposition?
When prices go up, we blame middlemen. We say they don’t pass on the prices to farmers and instead, fleece consumers. Now that they are going to be fewer in number, we want to protect them. Even communist parties are trying to protect middlemen. It seems middlemen have bought the communists!
What conditions should be added to provide protection to small farmers?
Conditions are already in place. The policy of starting with the metros is clear. It does not ask retailers to go to any town or city, but only to those with a certain population size, those that have the capacity to absorb big investors.
If FDI in retail benefits farmers, why does the US continue to provide subsidies to farmers? It is said farmers there would collapse if subsidies were to be stopped.
The farming models in the US and India are different. In the US, the farm size is very large and the costs are very high. The opposite is true in India. We have small farmers and the costs are lower. Besides, we also subsidise our farmers. In Punjab, we give them free electricity, water and remunerative prices and procurement.
Doesn’t FDI make Gandhian ideals totally irrelevant? What about swadeshi and self-contained villages?
India has changed much. We speak in English, we migrate, we import and we export. We should judge every policy on the basis of its impact on farmers and stakeholders like consumers. We should judge things rationally. If it is not good, the state can always roll it back.
States often take the side of companies, rather than that of the people. You may soon find municipalities eliminating hawkers or road-side weekly mandis to facilitate big companies.
Hawkers won’t go anywhere. Doesn’t the dhaba coexist with KFC? As for their removal, don’t municipalities remove hawkers even now? Municipalities are very anti-poor. So, we should raise our voice against these anti-poor policies, rather than blame FDI for everything.
The National Advisory Council’s report on urban poverty focuses on housing but doesn’t talk about basic facilities like water, education and health.
Housing is the most important requirement. If this is addressed, the main issues would be addressed.
People say the below-poverty-line census is unfair. The government has kept the humane living benchmark low — people in rooms not bigger than six-four feet would qualify for food entitlements.
The Social and Economic and Caste Census is unfair. But the government is insensitive. It is not going to stop the census. The government is rigid and adamant.
There is a view that food entitlements should be reserved for individuals, rather than a particular amount for every family, irrespective of its size.
The food security Bill asks for individual entitlements, which I believe is better. At present, two or three brothers living under one roof are considered a family and given a single card.
If family is to be taken as a unit, the criterion should be a nuclear family. Otherwise, it should be a certain quantity for each individual in the house.
Do you feel the unique identification enrolment of every citizen would ultimately help?
I feel it is a good idea, and we should go with it.