If I had the patience to write a book on everything that is wrong with governance in India, I would in all probability end up with a tome that would rival the Mahabharata in size. Agriculture and retail are two sectors that the government has managed to screw royally because of its good intentions; with a friend like this, who needs an enemy. There is an article in today’s ET – by Nidhi Nath Srinivas – about how most vegetables produced in India rot away thanks to policies of the government, and to some extent because of the shortsightedness of businesses who have caught the government’s disease of not being able to think long term. He writes-
The big difference is that when we buy Chanel we know who is taking our cash. When we buy vegetables, we have no clue. Surely we can demand to know who profits when tomatoes become more expensive than petrol (as I write, both are unavailable).
Quite obviously profits are not flowing towards vegetable farmers, who are as miserable as consumers. Take garlic. “We are losing about Rs 20,000 a killa on garlic because the mandi price is only Rs 5/kg,” says farmer Siaram of a village near Fatehgarh Sahib. We are paying Rs 30/kg for it. No wonder vegetable prices are so hard to swallow. They are pure fiction.
“Thank god, they are not. Otherwise, rates would been even lower,” says Siaram, who depends on hired labour. Though garlic is a hardy vegetable and can be stored, Siaram is unwilling to take the risk. “The extra cost of sacks, labour and storage will make losses worse,” he adds. Siaram is now depending on cucumber and cauliflower to pick up the slack.
The situation is about the same on most fruit and vegetable farms spread over 20 mn acres across India. Farmers are caught between the pincers of middlemen and perishable crops. Actually his farm size leaves Siaram far better off.
For farmers, the one ray of hope had been the entry of large companies in fresh food retail. That hope is over. Farmers have understood that large retailers can’t be preferred customers in their current avatar.
“All of them — Reliance Fresh, Bharti, Wal-Mart, Six Ten, and Subhiksha — visit my village. We are not keen to sell to them because they demand higher quality but pay same mandi price. In the mandi we can sell even poorer-quality produce for the same price. So why should we lose money by selling to them,” says farmer Haneef of a village 20 km from Khanna, Asia’s largest grain mandi.
Various state governments set up APMCs – Agricultural Produce Marketing Committees – to “[regulate] the marketing of different kinds of agriculture and pisciculture produce for the same market area or any part thereof.” These APMCs set up the mandis you see in cities all around India. Some state governments – like Gujarat – allow private companies to set up their own mandis but the same groups that oppose “Big Retail” also oppose the entry of corporates into this sector. They are not concerned with the producer and the consumer; they only want their pound of flesh. Sugar cane farmers are sometimes the worst affected by government meddling. Various state governments frame rules wherein farmers are prohibited from selling their produce to anyone except the mill – generally a cooperative one “run” by some crooked politician – in their district thereby, killing the market for cane.
Back to Srinivas’ article, the RBI monopoly on banking regulation makes it impossible for the food processing industry to access loans from banks-
But processors feel equally chopped and quartered by the lack of working capital. They buy fresh produce at harvest, process (which takes about six weeks) and market it over the off season. Most companies do two sale cycles in a year. Unfortunately, that isn’t good enough for their bankers, who demand sales worth Rs 5 for every rupee invested.
“They say these are RBI norms. If that is so, the rules need to be changed,” says the managing director of a Chandigarh-based company that makes frozen foods, ready meals, ketchups and stuff for brands such as Heinz, Al Kabeer, Reliance, and Big Bazaar, besides exports. Fresh food processors have to rotate their working capital as best as they can. When they fail, they fall sick and collapse. “The problem is not with the food processing industry. The problem is with the crazy credit lines,” he points out.
After crippling farming, forcing consumers to pay obscene prices for vegetables, controlling retail to “protect the livelihood” of the dig-a-pit-fill-it-and-call-it-work brigade, the government is out to cripple the processed foods industry.
No wonder vegetables rot away, the farmers remain poor and vegetables prices are outrageous. If the situation has to improve, every minister, bureaucrat and “social worker” needs a sound kick on their back side. They surely deserve it!