Allowing foreign direct investment (FDI) in multi-brand retail has the potential to reduce the prices of perishable food produce such as fruits and vegetables over the long-term, said research firm Crisil in its latest study. Significantly, the government has sought comments from public and other stakeholders on the opening of multi-brand retail to FDI.

The change in FDI policy is likely to stimulate a flow of investments from organised retailers and logistics companies into establishing quality supply-chain infrastructure for fresh fruits and vegetables. The wastage in the supply chain and the commission to trade intermediaries inflate the final price paid by Indian consumers for fruits and vegetables, it pointed out.

“An efficient supply chain will enable large retailers to source vegetable and fruit produce directly from agricultural cooperatives, lowering annual wastages, about Rs.63,000 crore in 2009-10, and reducing commissions of trade intermediaries. This, in turn, will improve realisations to farmers, reduce consumer prices of fruits and vegetables, and increase operating margins of large retailers,” the report said.

“Indian consumers pay nearly 2-2.5 times the price paid to a farmer as compared to 1-1.5 times in developed markets where the penetration of organised retail is much higher,” said Crisil Research Director Nagarajan Narasimhan.

According to Crisil Head (Research) Sridhar C, “Liberalisation of retail-FDI policy will help increase organised retail penetration. A likely increase in sales volumes of fruits and vegetables through modern store formats will encourage large retailers and logistics companies to invest in cold storage and transport facilities.”

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