Indian Government recently opened the Retail sector for FDI (Foreign Direct Investment). It is concerned as a boon by many, and also being said that Indian Farmers and Agriculture industry will flourish like never before. But we at Pani Panchayat are not of that opinion. Please go thru' the presentation to understand our views.

1. FDI in Food &
Agriculture
by
Pani Panchayat &
Organic Farmers’ Study Group
Pani Panchayat | Organic Farmers’ Study Group
Page 1 of 2716 Feb 2012

2. 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)
Pani Panchayat | Organic Farmers’ Study Group
Page 2 of 2716 Feb 2012
Inside Stuff

3. Farmers’ Expectations
Pani Panchayat | Organic Farmers’ Study Group
Page 3 of 2716 Feb 2012
• 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

4. Claims about FDI
1. More price for producers
2. Prosperity for producers
3. Middle man/chain elimination
4. Lesser price for consumers
5. Assured market for producers
6. Lesser wastage
7. New employment generation
8. Improved infrastructure
9. May led to growth in export
Pani Panchayat | Organic Farmers’ Study Group
Page 4 of 2716 Feb 2012

5. 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.
Pani Panchayat | Organic Farmers’ Study Group
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6. 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?
Pani Panchayat | Organic Farmers’ Study Group
Page 6 of 2716 Feb 2012

7. 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.
Pani Panchayat | Organic Farmers’ Study Group
Page 7 of 2716 Feb 2012

8. 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
Pani Panchayat | Organic Farmers’ Study Group
Page 8 of 2716 Feb 2012

9. 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.
Pani Panchayat | Organic Farmers’ Study Group
Page 9 of 2716 Feb 2012

10. Claim #6: Lesser wastage
Pani Panchayat | Organic Farmers’ Study Group
Page 10 of 2716 Feb 2012
• 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.

11. 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 !!
Pani Panchayat | Organic Farmers’ Study Group
Page 11 of 2716 Feb 2012

12. 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.
Pani Panchayat | Organic Farmers’ Study Group
Page 12 of 2716 Feb 2012

13. 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.
Pani Panchayat | Organic Farmers’ Study Group
Page 13 of 2716 Feb 2012

14. Strengths of Global Retailers
• Huge capital
• Advanced technology
• Lean management
• Solid networking
• Infrastructure: Storage & Transport
• Improved Supply Chain
• Experience
Pani Panchayat | Organic Farmers’ Study Group
Page 14 of 2716 Feb 2012

15. Global Retailers’ Target
The strengths will be utilized by Retailers to:
a.establish brand by sustaining initial losses
b.break current retailer system
c.make people used to their brand
d.source agro produce at lowest price
e.sell at highest price after the current retail
system is non-functional
f.get maximum profit with
minimum man-power
Pani Panchayat | Organic Farmers’ Study Group
Page 15 of 2716 Feb 2012

16. 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 inputs
Not just disappointment, there will be
more adverse effects …
Pani Panchayat | Organic Farmers’ Study Group
Page 16 of 2716 Feb 2012

17. Adverse effects of FDI
Pani Panchayat | Organic Farmers’ Study Group
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1. Increase in global warming & carbon foot
print
2. Increased Mono Culture
3. Increased Food Miles
4. Increased GM food
5. Stringent selection procedure
6. Agriculture will become more non-viable &
non-sustaining
7. Increased urban migration

18. 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.
CO2
Pani Panchayat | Organic Farmers’ Study Group
Page 18 of 2716 Feb 2012

19. 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.
Pani Panchayat | Organic Farmers’ Study Group
Page 19 of 2716 Feb 2012

20. 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.
Pani Panchayat | Organic Farmers’ Study Group
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21. Adverse Effect #4
Increased 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.
Pani Panchayat | Organic Farmers’ Study Group
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22. 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.
Pani Panchayat | Organic Farmers’ Study Group
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23. Adverse Effect #6
Agriculture will become more non-viable &
non-sustaining
Presently Indian Agriculture is non-viable & non-
sustainable due to various reasons.
FDI will add more fuel to this,
and led to worse conditions.
Pani Panchayat | Organic Farmers’ Study Group
Page 23 of 2716 Feb 2012

24. 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.
Pani Panchayat | Organic Farmers’ Study Group
Page 24 of 2716 Feb 2012

25. 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 FDI
Nobel Prize winner 1998, Economic Science
in an interview to NDTV
Pani Panchayat | Organic Farmers’ Study Group
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26. 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
pbs@esd-india.com
Pani Panchayat | Organic Farmers’ Study Group
Page 26 of 2716 Feb 2012

27. Jai Hind
Pani Panchayat | Organic Farmers’ Study Group
Page 27 of 2716 Feb 2012
pbs@esd-india.com