FDI, farmers & a handful of salt

As yet another perfect political storm came to a close in New Delhi, the real issues went out of the window. Which is convenient, because as I’d pointed out last week in these pages, big retail is such a thunderous non-issue that it made no sense for it to have almost brought the government down. But of course, politicians on both sides, pro- and anti-FDI, had to base their positions on something that deeply stirred their conscience. Last week, it was the Indian farmer. The anti-FDI brigade said FDI retailers would ruin Indian farmers by tying them into enslaving contracts. The pro-FDI brigade said it would bring farmers untold riches by offering them a great price and building magical networks of back-end value chains.

But as we found while reporting this for our show, Truth vs Hype, both sides have tied themselves in hopeless knots.

All parties and state governments agree that farmers must be liberated from the monopoly of government-controlled mandis, which are dominated by middlemen. To this end, many state governments have adapted the model APMC Act, which allows private players to buy directly from farmers. Let’s now take the example of three anti-FDI states, Bihar, Orissa and Madhya Pradesh, to see how their stance on FDI clashes with their policies for their states. All the three have made changes to the APMC rules to allow entry of private players. But they could not generate the same level of private sector interest, as say Maharashtra, Karnataka or Haryana which are linked to major demand centres  like Mumbai, Bangalore and Delhi. So what do these states do? They sign up with global consultancy Ernst & Young to ‘link the farmer to the corporate value chain’. E&Y’s Sidharth Das told us that they invited Kishore Biyani’s Future Group to run a pilot project sourcing onions from Orissa. And that Bihar and MP are expected to get on board by the end of the year. But during the FDI debate, these same states demonised the private/corporate buyer. In its letter to the Centre objecting to retail FDI, Bihar says, “Giant retailers would have far greater buying power vis-a-vis the farmer, compared to the existing intermediaries… and would further worsen the problems for the farmers.” Does Bihar now suggest that it’s better for farmers to go back to selling to middlemen, then, say to Wal-Mart? If so, why did it scrap the monopoly of state-run mandis altogether? And who should buy the produce of its farmers?

When we asked, these states argued that they are not against Indian private retailers, only international ones. In other words, Reliance is OK, Wal-Mart is not. In the time of globalised capital flows and Indian MNCs, this comes across as a somewhat specious argument. Moreover, as E&Y explained, they aren’t only seeking the interests of Indian retailers, but global food companies as well. In the case of Orissa, E&Y is looking to bring in Loblaws of Canada, and the Barakhat and Gyma food chains of the Middle-East.

In the case of anti-FDI crusader Mamata Banerjee, things get even more complicated. A year after she came to power, PepsiCo sourced thrice as much potatoes from West Bengal’s farmers. The US multinational has been buying potatoes via the contract farming route for its Lay’s chips for over three years now, but the change in guard in Bengal from the CPM to the TMC made no difference. In fact, procurement went up. From 22,000 metric tonnes in 2010, it has gone up to 60,000 MT in the current year. Pepsi says the arrangement benefits more than 10,000 farmers in six districts of Bengal. When asked about this, West Bengal’s minister of agricultural marketing, Arup Roy, seemed stunned. His answers reflect the prevailing confusion; in the same breath he said it was OK for farmers to sell to Pepsi, but that they are against contract farming!

This is not to endorse contract farming, which comes with its own risks, especially for small and marginal farmers. But it again begs the question – what options have these strident politicians provided to their farmers? What is a better option for West Bengal’s farmers? Pepsi, or making a trip to the Sealdah vegetable mandi in Kolkata? Sealdah is so much dominated by middlemen that there are four layers between the mandi and the farmer. In fact, the farmer doesn’t even come to the mandi.

The Centre’s track record is no better. As we had decisively demonstrated last week, its claims of a stampede of global big retailers coming in to set up an agricultural back-end are utterly bogus. The global credit crunch and the dismal track record of Indian big retail has put paid to any such hopes.  Moreover, it is astonishing how the Centre can outsource responsibility for setting up something as basic as a cold chain to multinational retailers. As Frontline pointed out in its March 2011 issue, between 2010 and 2012, the government has cut down expenditure on food storage and warehousing by Rs 1,453 crore.

The key here is not for politicians to squabble over who is buying from the farmers. But to empower the farmers so that they can negotiate better terms, regardless of whether they buyer is Wal-Mart, Reliance or the mandis. At the risk of repetition, one way is to encourage the setting up of rural cooperatives. If farmers go a step further and form Amul-type companies, they can even be stakeholders in setting up storage and processing chains, and market directly to consumers.  

In response to last week’s piece, many readers wrote in to ask why the Amul model has not been replicated outside Gujarat, for non–dairy products like fruits and vegetables. There isn’t an easy answer to this. Partly, it’s because there is only one Verghese Kurien. But even Kurien had to battle relentless political interference to make Amul a success. These battles are being fought every day by Kurien’s legatees who are nurturing similar initiatives across India. Who is opposing their attempt to empower farmers? No prizes for guessing. Which is why every time the Indian neta invokes the farmer, it’s best to reach for the salt. Not a pinch, but a handful.

Sreenivasan Jain is Managing Editor, NDTV.
He anchors the ground reportage show, Truth vs Hype, on NDTV 24x7 ‘The Thick of It’ will now appear every fortnight instead of every week