Indian Farmer Group Says Foreign Retailers \"Not a Big Blessing\"

September 21, 2012, 7:37 am

By VIKAS BAJAJ

On Friday, a day after it formally allowed foreign retailers into the country, the Indian government took out full-page ads in many newspapers proclaiming that the move would result in “better prices to farmers,” or in other words higher farm incomes.

That has long been the biggest selling point of allowing Walmart, Tesco and other foreign supermarkets into India. A farmer in Punjab, Avtar Singh Sidhu, told me as much when I visited Jalandhar last year to get the reactions of farmers, traders and consumers to the government's previous, failed effort to open up the retailing sector.

Earlier this week I spoke to another farmer, Ajay Vir Jakhar, who has become a pr ominent voice for reform in India's agricultural policies. He offered a more qualified endorsement of foreign supermarkets, saying they would help farmers but they wouldn't be the kind of game changer that the government was making them out to be.

Mr. Jakhar, who grows a citrus fruit known as kinnow in Punjab near the border with Pakistan, is the chairman of the Bharat Krishak Samaj, or the Indian Farm Society, that claims to represent 100,000 farmers. An articulate spokesman for his cause, Mr. Jakhar, who returned to his family farm a few years ago after dabbling in real estate and other businesses, has been cultivating a high profile as an advocate for Indian agriculture, lobbying policy makers like the commerce minister, Anand Sharma, and appearing frequently in the Indian media.

While he welcomes the government's plans on foreign retailers, Mr. Jakhar said the policy change will only result in a small benefit to most farmers. In most Indian states Walmart and other stores will be required to buy produce through a monopolistic distribution system that compensates farmers poorly for their produce while benefiting a vast array of middlemen.

“It's a blessing but it's not a big blessing,” he said. “As an organization we have been saying these large corporations have to purchase directly from us. If they go through the middlemen, it won't make a difference.”

The crux of the problem lies in the agricultural marketing laws of most Indian states that forbid retailers from buying directly from farmers without going through designated wholesale markets or paying a tax to those markets, according to Mr. Jakhar and other agricultural experts I have spoken to in the past. While the national government has been asking states to amend those laws to allow for direct purchase of produce from farms, most have not done so because the traders who control the wholesale markets have significant political clout â€" they are also a b ig constituency of the opposition Bharatiya Janata Party, which opposes allowing foreign retailers into India.

Mr. Jakhar argues that the national government could have mandated that retailers who put up stores of a certain size be required to buy as much as three-quarters of their fruits and vegetables directly from farmers. That would have earned the government significant support from farmers, though presumably it would have also antagonized wholesale traders.

“The government is too focused on trying to make traders understand that there is nothing to fear,” Mr. Jakhar said. “That effort should have been put into making farmers understand that this is good for them.”

Mr. Jakhar further argued that his association was not out to decimate wholesale traders. Walmart and other retailers are unlikely to directly purchase all, or even most, of the produce grown by India's many farmers. That means many farmers will continue to depend on traders, who oft en give loans and other support to growers with whom they have longstanding relationships.

“As farmers we don't want traders to finish off,” he said. “We don't want middlemen to finish off. After all we want people to sell our goods to. We just want more competition for our produce.”

He argued that India is too large and diverse a country that one new policy can change the terms of trade between two large communities likes farmers and traders overnight. India is a country of many, many small farms â€" average landholdings are less than two acres â€" and many, many small stores. And neither are likely to disappear if Walmart starts opening stores here, he went on.

“This problem of many small farmers and many small retailers will not go away,” Mr. Jakhar said. “We are too diverse a country for something to happen so fast.”