‘Experience shows that procurement by MNC retailers does not benefit small farmers’

The Communist Party of India (Marxist) has strongly opposed the policy notification on foreign direct investment (FDI) in retail trade, despite widespread opposition.

A Polit Bureau statement issued by the party said that by this policy announcement, the Manmohan Singh government had taken the single biggest step of destroying the livelihood of those engaged in retail trade. The party said it would resolutely wage a struggle to get this anti-national decision rescinded.

The party said the rules announced by the government for FDI in multi-brand retail trade were designed to serve the interests of multinational companies such as Wal-Mart, TESCO and Carrefour. The investment floor of $100 million (Rs. 550 crore) is insignificant for giant multibillion-dollar retailers.

The restriction that foreign retail outlets should be in cities with a population of over 10 lakh was irrelevant as such cities were the very urban centres that the MNCs intended to access as they were the most lucrative segment of the market. Furthermore, the rules provided that in States/Union-Territories that do not have cities having a population of more than 10 lakh, foreign retail outlets may be set up in cities of their choice. Thus, foreign supermarkets could be set up in all parts of the country and in a wider range of urban centres, the statement said.

The condition for making at least 50 per cent of the investment in ‘backend’ infrastructure was being cited to argue that this would lead to more cold chains and other logistics, benefiting the farmers. International experience had, however, shown that procurement by MNC retailers did not benefit the small farmers. Over time, they received depressed prices and found it difficult to meet the arbitrary quality standards.

“That the government is bent upon promoting FDI in retail at the cost of domestic interests is clear from the dilution of the conditions set for FDI in single-brand retail. Earlier, the rule was that for FDI above 51 per cent in single-brand retail, there was a mandatory sourcing of at least 30 per cent of the value of products sold from Indian ‘small-industries/village and cottage industries.’ Now this has been diluted. It is stated that instead of ‘mandatory sourcing,’ the sourcing may ‘preferably’ be done from small and medium enterprises. Further, ‘the definition of small industries has also been done away with’,” the statement said.

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