More cold chains, Amazon in food retail augurs well
With harvest- and post-harvest losses, in 2012-13, estimated at nearly R93,000 crore—or 8-10% of production according to a study just done by CIPHET—it is not surprising that, for several decades now, allowing FDI in retail has been touted as the single-biggest solution to agriculture’s problem. Once large retailers such as Walmart and Tesco set up shop, they would start buying directly from farmers. Once they did this, not only would farmers get a higher share of the final price of the fruits and vegetables as compared to the fraction they get today, the high level of losses due to a virtually non-existent cold chain would also fall considerably since the time from farm to fork would reduce sharply; as a corollary, high inflation in the sector would also dampen. While the government has, historically, offered incentives for setting up cold chains, the progress has been slow since, without an assured front-end offtake for fruits and vegetables, few cold-chain suppliers have wanted to invest. If, however, a WalMart was to come in and assure a certain level of business, cold-chain units would be more ready to come and invest.
Sadly, opposition from retailers in India ensured the FDI proposal went nowhere and while home-grown organised players did expand their retail footprint, the pace was limited and the proportion in fruits and vegetables was relatively low. While the BJP has traditionally been opposed to FDI in multi-brand retail, the government changed the nature of the debate by saying it was going to push for FDI in food retail since this would directly benefit farmers. Initially, the proposal didn’t look like it was going anywhere, especially since there was no provision for allowing such stores to stock non-food items—even now, while food processing minister Harsimrat Kaur Badal has been pushing for a high share of non-food items in food-retail outlets, there has been no final resolution on it. Despite that, however, with top firms like Amazon planning to invest $500 million over the next few years, it would appear a promising start has been made in terms of organised food retailing. Though it may not be directly related, it is also interesting to note the government has just awarded grants to companies to build 101 cold chains with a total capacity of 2.8 lakh tonnes. With local e-tailers—mostly funded by foreign money though—now looking at increasing their footprint in the fruits and vegetables space, and foreign giants like Amazon firming up their plans to set up brick-and-mortar stores, a significant step has been taken as far as Indian farmers are concerned.