Food Ministry for right to reserve grain

Food Ministry for right to reserve grain

With allowing foreign direct investment (FDI) in multi-brand retail on the cards and faced with the Herculean task of implementing the ambitious National Food Security Bill (NSFB) after its enactment, the Union Food Ministry has sought for the first right to reserve foodgrains when the global retailing giants enter India.

“The Ministry, recently in a note to Department of Industrial Policy and Promotion (DIPP), has maintained that through this clause it will ensure it has enough foodgrains for beneficiaries under the NSFB,” a Food Ministry official told The Pioneer.

A few days ago, DIPP moved a formal proposal to allow 51 per cent FDI in multi-brand retail which will allow global retailing giants like Walmart, Tesco and Carrefour to enter Indian market. And the NSFB, which will be tabled in Parliament in the Winter Session, will entail an additional requirement of 10 million tonnes (MT) of grain for Public Distribution System (PDS). At present, the government procures 50-55 MT foodgrain through Food Corporation of India (FCI) for meeting PDS requirement.

The official also said that although the first right to reserve will ensure that the ministry has enough foodgrains to meet the PDS requirement, in case of worst scenario like drought (shrinking the availability of grain) the government may even notify foodgrains in the Essential Commodities Act to ensure regular supply. Retailers sell processed staple food (like atta and allied products) for which they will have to procure foodgrains.

Besides this, the Ministry has sought that 50 per cent of the investment by the international retailer should be put into back-end infrastructure (farm to store linkage). This will help farmers sell their produce directly to the retailers, thereby get good returns on their produce and reduce wastage.

Farmers have welcomed the move since onset of global retailers will break the monopoly which exists between private guilds of middlemen and commission agents in mandis. However, they said that the policy could be tweaked a bit to further ensure farmers' interest. Ajay Jakhar, Chairman of Bharat Krishak Samaj, suggested that the government should set in a clause that 75 per cent of the total retail sales of agriculture produce are purchased directly from the farmers and 50 per cent agriculture produce purchased directly from the farmers is from 100 km of every store.

DIPP has circulated a draft note on the policy for inter-ministerial consultations. At present, the country allows 51 per cent FDI in single brand retail, 100 per cent in cash and carry, but bars it in multi-brand retail.

The government was not keen on opening foreign investment in multi-brand for the reason that it might rob small kirana shops (unorganised retail) of their livelihood. However, an Indian Council for Research on International Economic Relations report, in 2008, noted that the impact of organised retail on unorganised retailers will be negligible and will remain confined to urban markets.

But now the government is under pressure to re-consider its stand for a number of reasons: high inflation and decreasing foreign investment in the country due to turmoil in global market. The Finance Ministry has given its consent to the draft Cabinet note of DIPP on opening the multi-brand retail to foreign investment.

The government has taken a number of measures to tame inflation but it has not got much success. Experts say this is due to the fact that the current high inflation is because of inefficient market infrastructure and supply chain. The Chief Economy Advisor to the Finance Ministry Kaushik Basu is of view that FDI in multi-brand retail will sort out inflation problem in long run through competition and investment in forward and backward linkages. Despite allowing 100 per cent FDI in warehousing and cold storage and duty-free imports of supply chain equipment, no big investment is coming into it.