Thursday, December 1, 2011

My Confusion on FDI in Retail Sector

Iam reposting views i shared with my friend on my Facebook over allowing 51% FDI in retail sector . Mariappan is former student of IISc Banglore and Senior Scientist with GoI. He lives in Banglore.

Govt has okayed 51% FDI in Retail sector, since then Parliament is stalled. Every one had an opinion either in its support or against and it led to a Chaos everywhere . So I thought like any Aam-Admi , I too shud have an Opinion on FDI. For last 4 days had studied extensively abt FDI in retail sector , more i studied, more i got confused. So i decided to stay Neutral on the subject. What iam 'awe' at opening FDI is the manner it was bought in with out proper debate. If FDI is so beneficial to Farmers then why restrict it to just 51% , it shud have been opened to 100% entry. Prime Minister MMSingh says it is pro-reform policy , if it so why did he opposed in 2003 when BJP wanted to open FDI to 26% ?? Bottom Line is, its all game plan of Congress to divert the attention of Public from Inflation, JanLokpal , Chidambarams invovement in 2G scam etc...
Was allowing FDI in Retail sector a greater slap by MMSingh on the face of SoniaG ? Atleast Iam convinced. Much to the shock of Madame, MMSingh ignored Sonia & Congress and moved ahead with FDI . Now Sonia is left with no choice but follow footsteps of MMSingh. Off-late there was Buzz that SoniaG planning to replace MMS with AK.Antony or Meira Kumar . PM has cleverly knocked hornet nest , which will keep him in chair for some more days. Sonia used Sanjay Singh to show her displeasure towards MMSingh's FDI and also Anthony to make Kerala Cong  pass a resolution against FDI. Sonia can show her dissent but now can not replace MMSingh as long as he enjoys support of allie parties . I feel MMS is no more a Puppet Prime Minister , who dance to Sonias tune. The only way she can make MMS resign is , show the carrot and promote, make him President of India in 2012.
 If Retail American Giants like WALMART cudnt save American Farmers & American economy , how wud its entry into India be helpful to our Farmers ??  I was shocked when i read that in India every year 40 % of produced food grains/ Veggies/Fruits get destroyed coz of non availability of secured Godowns and Cold Storages . With FDI investments pouring in we mite see big leap in num of Cold storages coming up in rural side. Thats one encouraging point in opening up FDI in retail sector. Do you know most of the food grains are damaged by Rats ??
  Building Cold Storages is not at all complicated one , it does not need Rocket Science to build one. Then knowing 40% loss of Food Grains.Veggies , why dint our govt encouraged farmers to build the plants ? Or is it that Indian Farmer believe in traditional storage rather than taking his harvest to cold storage ?? In any case, loss of 40 % food grains is not pardonable.

Why oppose 51% opening of FDI in retail market, when we see Chinese goods are dumped cheaply into market. When we cudnot stop cheap Chinese products , then why oppose when Billions of US$ are waiting to come into country's retail industry ?? These incoming US$'s may give boost to Indian economy and arrest Inflation. 

Cheap Chinese products are manufactured in China and dumped in Indian Market , thus they are not investing in Indian market and moreover they are depriving us from employment. This is serious issue and shud be dealt seriously. Maybe opening up FDI in retail market will arrest of Chinese Products into Indian market. 

If 51% FDI is allowed in Retai Industry , we will see exit of millions of Small traders from market. Thats really bad , but we protected them for last 60 years , how long do they need protection. Even after 6 decades of State protection , if they cant stand on their own and fight then whom wud they blame?? . Its saddening but this the truth about Indian traders.

What angers me about Indian retail trader is despite the state protection wot did they done for the society. They never do proper billing , evade taxes , rob costumers with high rates . And above all wot troubles me is Indian trader plays with customers health by doing Adulterationin food items. Show me one Kirana store or Sweet shop anywhere which doesnt do Adulteration ??? As i write this, my Blood is boiling remembering their Adulteration acts. Feel like Cursing them.

Mariappan: Raj, pour as much angst you have against the indian traders, but what makes you think Walmart or any other foreign retailer is going to be better? They will bring in BT modified untested foods in the market, they would undercut the indian traders to begin with and when the indian trader is driven out of the market, they will make a cartel and monopolise the whole trade, at the stage the customer will have no choice but to go to them. Is that OK with you? As for government protection, what has the government protected them from? After 60 years has the government built in enough food storage infrastructure, has the government ever made any sincere effort to protect the traders from even the rodents that gulp the major part of the produce. The failure of the government should not be equated with poor practices of the trader.   

My Take : I in my first post made myself clear that iam Neutral on opening up Retail sector to big overseas player. I was just posting all the 'stray' thoughts that made a place inside my head.

BT seed is already in the market since PV Narsimaha Rao days. FDI has least to do with it . My region Telangana is an victim of BT farming . After paddy cotton is grown widely in Telangana , but since farmers choose to move BT Cotton there is devastating turn of events . One American Cotton seed combany "Kargil" has destroyed many farmers lives . Despite warning by Agri-Scientists they still stick to "Kargil" seeds. Iam witness to daily deaths of these farmers in my Dist. The amount of pesticide it need to grow/survive is very much alarming , its caused in heavy health hazards . Its an big issue , ill ponder on it on diff day .

So coming back to FDI , it will eliminate the middle man and thus "may" be benificial to local farmer . Most of these companies buy directly from farmers , this has been their policy eveyrwhere. So when they eliminate "middleman" farmer get gud price over his harvest and it will lead to reduction in "cost" . This will further bring down the PRICES. So ypur fear fo Price rice doesnot stand in scrutiny.

Ypur another fear of erasing small/medium Indian players also does not stand . Coz if you read the Govt document , it clearly stated that the Big players can open their "Malls" only in Mjaor Cities. It means hardly 5o cities are thrown open for competition and remaingin thousands of towns and villages are still "protected" by state.

FDI in retail sector will unleash a big competition in retail market thus players have to be competitive in price and quality to stay in the market . Dont you think this price-war will be benificial to Billion Indian Customer. Adulteration food items will stop which has taken lives of many. Did you notice during last Diwali above 50% of Sweets were contaminated/adulterated . If this is the situation in National capital , then how bad it cud be in Towns.

When you rake up issue of 'why dint govt built storage houses' brings me laughs. I smell a 'socialist' in you. Did you read Chanakyas "Arth Sastra" , in it Chanakya clearly says that Govt duty is to Protect its citizens from External attacks and internal security . He specifically writes that Govt shud not venture into doing business . So i strongly belive his Arth Sastra principles. Govt has no duty/responsibility to build Cold Storages , its not his business. Farmers and Private entrepreneurs have to deal with it . Can you show me one area where Govt running businesses have a success growth in past decade . Let societs on its own evolve and design wot they neeed . Govt shud be an facilitator , shus work as an "catalyst" but not get into doing business

Mariappan : Raj, some of your arguements are perhaps ill informed or u chose to ignore the facts. The Retail market is allowed to be set up in places having a population of 2 lakhs, now imagine the havoc they are going to cause, the government which says a minimum of 10 lakh population is required to avail JNNURM funds doesnt mind giving licences for places with 2 lac population. You are quoting chanakya, fine, but has any government in india till date followed any of his tactics leave alone practice his principles. Fine if the business of the government is not to do business, why the hell, is the government involved in everything from making newsprint to broadcasting? Why is the government fixing minimum support price for farmers, why is the FCI buying grains from farmers and then allowing it to rot in their godowns? Again you are quoting just one instance of BT Cotton which is killing farmers, now imagine if the same BT food grains are marketed by these retailers, what would be the fate of our health and more specifically our stomachs? As for adulteration, this is a universal phenomenon, even in the so called advanced country like Europe, we have seen how avian flu and mad cow disease propagated. Here the direct cause may not be deliberate adulteration, but selling contaminated food is still worse than adulterating. Eliminating the middle man in the indian context is next to impossible my friend, it is not that the farmer is unaware the profits made by middleman, it is the need of the farmer that makes him depend on the middleman. A major part of the problem lies in our culture, our traditions and rituals. Everyone wants to follow rituals and you know rituals are money consuming and where else does the farmer go for money than the middleman. Do you think Walmart or any retail chain will give money to the farmer before his produce his ready for the market? As for price war between the retailers and then reduction in prices, has it happened with coca-cola, pepsi or should i say has your thums up rates come down? In fact the goli-soda still sells at 2 rupees, it is also coloured carbonated water without the marketing blitz. We have shell and reliance in the petroleum sector, did they ever reduce the price when the international prices came down, no, on the other hand when the government run petrol pumps operated at a thinner margin, these guys shut shop. 

My Take :  Govt Doc relased via source has put a restriction that Big players can enter in those cities which has more than 10 lakh population . If my knowledge is right it stands somewhere between 55-60 cities in India. As i said remaining cities are protected by state. How Long ? No One knows? My Question is why shud we protect an Industry for decades together? We protected them for 6 decades by not allowing big-players into market , has it done any good for them ? Nope. The become lazy and never evolved any strategy to upgrade . Ok tell me , your neighborhood Kirana guy is there for long time making money , did he ever upgraded his Shop , never . Thats what is killing him, every time he has an problem he looks towards govt to bail him out. I know fighting a big player is tough , but he has to realise that theirs no escape . Fight and if you have to DIe, Die like a Martyr or go for Kill and come out Triumphantly. State protection is bad to them, thats what i feel.

I remember those days when Pepsi made entry into India . Parle(Thums UP & Maaza) was leader in the market , infact they were monopoly . Parles Ramesh Chauhan dint believed in his product , out of fear he sold all his Products to Coca-Cola . When you dont prepare your entrepreneur for competition this is what happens , fearing the worst he meekly surrendered to Coca-Cola. Even after 20 yrs of sell out , Thums-Up has majority of market . If only Ramesh chauhan knew to stand to competition , today he wud have beed world leader in Aerated Drinks sector. Regarding ur taunts on increase in price of "my" Thums Up , is , its very much but Obvious to rise in price levels in 20 years. Price rice is seen all over , and same applies to Thums-Up as well. To understand the Price rise one shud study the Inflation and Rupee- US Dollar exchange value. its the market which determines the price .

Reg' your qustion on why govt into newsprint, broadcast and 100 other things , that what , it shudnt be anywhere which is called as business. One and only duty of Government shud be protect geographical boundaries and install a lawful governance system internally . Govt shud stop running Airlines, Railways, Public transport or any such function which can be a profit oriented .


1 comment:

కమనీయం said...

I donot know the politics behind this. but Iam convinced that FDI is not needed.It may do more harm than good to our farmers and small shopkeepers.Why cannot we ourselves do whatever FDI IS supposed to do.We should all oppose this move.