It’s Time for Reality Check on Malls Before Allowing FDI in Retail Sector

As India continues to debate on the pros and cons of foreign direct investment (FDI) investment in the retail sector, it would be interesting to understand the interplay of politics, corporate influence, intrigues of supermarket chains and greed governing the trade treaties with the fourth largest staple diet of human consumption, banana, in focus. 

Supermarkets are now the only players in the banana chain to consistently make profits from bananas. It is estimated that bananas represent 2% of the total turnover of North American and EU grocery retailers. Bananas are the single most profitable item passing through the check-outs with more than 33 thousand product category in stores. While retail chains may appear as warriors on behalf of poor consumers getting the best possible deals for products, workers who produce them are paid rock-bottom wages and their local environment is destroyed. 

It is important to note that the world banana market is geographically fragmented mainly due to transport costs and diverging import policies in the consuming countries. Around one fifth of globally produced bananas are exported from the developing countries to developed nations as an example of unidirectional South-North trade. The dominant banana importers are EU countries (29.2%), US (27.5%), Japan (8.2%), Russia (7.9%) and Canada (3.5%). Only the Dwarf Cavendish variety is traded while there are hundreds of varieties. The main banana producing countries, such as India or Brazil, are hardly involved in international trade. About 20% of the 70 million tonne of bananas produced each year enter global market. Just five companies—Dole, Del Monte, Chiquita, Fyffes and Noboa—control some 80% of the international banana trade.

The descriptor “banana republic” actually originated when a few of the companies in Central America having business interest in banana ensured changes of government in Honduras and then went on to convince the administrations of Truman & Eisenhower to order the CIA’s action in Guatemala. Colonial histories influence trade agreements and partly determine who exports to whom. In the ’90s, five Latin American countries (Costa Rica, Venezuela, Colombia, Guatemala and Nicaragua) backed by the US (on the instigation of an almost bankrupt company with a large banana interest) a filed formal trade complaint at the World Trade Organization and fought a series of trade disputes with EU.

From the beginning, commercial enterprises in banana trade in collusion with the friendlier governments derived profits from the private exploitation of public lands while the debts incurred became public responsibility. The companies, by manipulation of national land use laws, could cheaply buy large tracts of agricultural land for plantations whilst employing the native as cheap manual labourers after having rendered them landless. The biggest problem with banana trade is that the competition for the lowest prices is led by supermarkets which are constantly looking to buy the cheapest bananas. This comes at a great cost to plantation workers because they in turn are paid lower wages.

It is important to do some reality check with experience of other nations before allowing FDI investment in retail. 

Defer not till tomorrow to be wise, tomorrow’s sun to thee may never rise

– William Congreve

Published in The Economic Times

Who Really Benefits From Agri-Corporatisation?

We are often advised that corporatisation will automatically take care of ills of agriculture (e.g. low productivity, lesser influence of middlemen). But who is driving the corporatisation agenda into Indian agricultural system? Consumers? No. Producers? No. 

The government’s primary economic function is to maintain competition. Instead, the top priority of the government has become to promote economic growth. Corporate interests have entered every aspect of agriculture — from the making (influencing) of laws to the delivery of basic public services. The corporations have gained so much influence in certain machinery of the government that not only does it fail to ensure competition; government at times has become a tool for corporate exploitation of both people and resources.

 
To cite the example of Bihar in maize: In December 2009-10, the state had to step in with distributed assistance to farmers. The state exchequer had to take on an extra burden of 61 crores, which it had to pay as compensation to farmers using private hybrids, on account of “non-formation of grain”. This is the first time a chief minister has dared to expose a large body corporate that in connivance with GEAC (Genetic Engineering Approval Committee) & ICAR began trials even before the environment ministry’s clearance. 

On the other hand, the “so called” success of BT Cotton in the states like Gujarat has been over emphasized by the political class. In the interlocked agricultural market, if individual commission agents at times have hijacked the chain in past on delivery side, it is more likely that institutionalised middleman with their stranglehold over the ability to influence policymaking will prove to be a curse both on supply and delivery side. 

As a consequence of farm politics, some commodities are more heavily subsidised than others. Majority of all food/farm subsidies goes to wheat, rice, sugar and that too in limited pockets of a few states. 

All over the world, some of the most blatant conflicts of interest in politics have occurred among politicians and others who serve in important agricultural policymaking positions and has substantial interest in doling out the subsidy baggages to the pockets of influence. They put the economic interests of corporate lobbyists ahead of the public interests of society in general. In certain cases, these influential persons have also become business partners of the corporate.

Past experience shows that big food retail has neither benefited the farmer nor the consumer. Contrary to popular belief, the big retail has not helped in creating jobs either. If the supermarkets were so efficient for the farm economy then why is the US providing massive subsidy to its farmers? 

In corporatised food value chain, the individual nutritional (protein, carbohydrate, vitamin etc.) components are highlighted over balanced diet (dal, roti & subzi). Problems of obesity, diabetes, hypertension, heart problems, and food-related cancers have become epidemic with growing corporate control of the US food system. Let us protect India from these. 

Published in The Economic Times