Should Organized Retailing be allowed in Fruits and Vegetables?

Recently, we are witnessing attacks on organized retailers like Reliance Fresh in most of the states in the name of monopoly and exploitation in the long run. Can the organized players monopolise the fruit and vegetable retailing in the country? Are they exploiting the farmers?

Organized retail is growing at a faster rate in the country with the entry of big players. The big business houses like Reliance, Bharathi, Pantaloom, Subhiksha, Heritage have entered retailing of fresh fruits and vegetables. This sector which was earlier regulated by APMC act and operated by many small unorganized players is now opened up with the modifications in APMC act.

Most of the time, the farmers in India are not getting even 50% of the price paid by the consumers because of exploitative practices of middlemen and large scale inefficiency in supply chain. The inefficiency is still higher in perishable goods like fruits and vegetables. Traditionally, farmers used to sell their produce to village level traders at lower prices because of lack of transport facilities, market facilities, cold storages, time, knowledge, power, etc.

The produce from village traders was procured and passed through host of middlemen before reaching retailer and consumers. At each step in the chain the price of the produce increased with deterioration in quality because of multiple handling and time taken. The post harvest losses were as high as 30 % in fruits and vegetables. All these practices resulted into higher consumer price for the produce. The major share of the consumers’ price is swallowed by intermediaries which resulted into lower price for the producer. The farmers are being punished for no fault of theirs.

Corporate houses have entered retail sector of fruits and vegetables with the modifications in APMC act which allows contract farming and setting up of private markets. These players are replacing the middlemen purchasing the fruits and vegetables directly from farmers and selling to customers at their own stores. Some of them have entered into a contract farming agreement with farmers, providing technical advice and inputs to farmers and investing in storage and transportation facilities. These have resulted into reduction of post harvest losses, preserving the quality of produce, improved marketing efficiency, benefiting the farmer and also consumer. Now farmers are getting better price, have many options to sell their produce and consumers are also getting better quality produce.

This has affected the exploitative middlemen and traders who are protesting against the organized retailing. If they believe in transparency in transactions, true competitive spirit they have to compete with organized players. Why can’t they start operations like organized players by organizing themselves into cooperatives or groups and compete? Their argument is that allowing organised players like reliance will lead to monopoly and farmers will be exploited in the long run.

At any point of time and place organized players will not be in a position to monopolise this sector but they will surely change the present system. Always the demand exists for vegetables at street corner shops and street hawker. Organised players can’t open shops in all the streets and cater to all the section of the population. They can’t displace small players altogether. The organized retailers will not invest in small towns and win over small players. Small vendors will have an edge over big players in small towns in terms of cost of operation etc.

Presently, this sector is monopolized by exploitative middlemen and traders and they are worried about themselves. The real concern for them is not the farmer but themselves. What they have done to farmer all these years? Why farmers are not getting right price for their produce when only these people are operating in the sector? Why the farmer has to suffer because of inefficiency in present marketing system?

The efficiency of agricultural marketing system has direct impact on more than 60% of Indian population i.e. farmers who are dependent on farming for their livelihood. If the organized retail bring competition and improve infrastructure and efficiency why can’t we allow them? The investment required for improving infrastructure is huge and will take decades if we depend on the government. For example, presently we have cold storage facilities sufficient for only 10 % of production of fruits and vegetables. According to the estimates, in another 10 years we need an investment of Rs.27000 crores for cold storages only. One can imagine the total investment required for other facilities. In this situation we need to encourage private participation in the sector that are willing to invest and improve the system.

Why can’t this sector be opened up and allow fair play of supply and demand forces? Why can’t we liberalise the sector and allow at least Indian business houses if not other MNCs? Why can’t the farmers realize the right price for their produce? How long can we support these vested interests?