Saturday, December 16, 2006

Retail and farmers

Here's an article in the Hindu Businessline on the effect of Reliance Fresh on farmers. The Indian vegetable, fruit and any farm trade is dotted with middlemen. The effect of these middlemen and their cuts has the effect of pushing the prices at the customer end and reducing the price at the supplier end.

Some months back when I had visited a wholesale market, I found that the price of Onion is 3 rupees a kilo (max) if you picked up a 100 kgs. If thats what you pay at the city end of the wholesale market, imagine what a farmer would have got. Perhaps a rupee? So, if you a farmer you would have to jump through hoops of middlemen and hamalis and agents to get your produce to the city - and there is no guarantee that you will get a good price.

The article says that ladyfinger used to be sold by farmers for 150 rupees for 20 kilos - thats about 7 rupees a kilo. The retail price varies from 12 to 20 rupees a kilo depending on quality and what does the farmer get? 7 rupees minus commission and other charges.

I have argued before (like many others - not including leftists and those who oppose progress) that opening up the farmer end for retail trade will result in benefits that will reach farmers. Ditto for contract farming. As Ravikiran says, we have a stupid romantic view of farming and those far removed from farming invent policies for farmers. The farmers that we have in our mind and textbooks don't exist. Farming is a business and has to be treated as such( and that includes taxing them too).

Retail ventures like Reliance will have a cascading effect on the rural and farm economy - not achieved by years of croses government largesse/subsidy of which 15 % reached the end beneficiary. Retail (and similar ventures like e-choupal) will ensure that all 10 rupees of a kilo of okra will reach the farmer without anybody pocketing it.

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