Volume 28 - Issue 26 :: Dec. 17-30, 2011
INDIA'S NATIONAL MAGAZINE
from the publishers of THE HINDU
COVER STORY
Sustained resistance
| Left parties and farmer organisations play crucial roles in the opposition to FDI in multi-brand retail trade. |
At a wholesale cash-and-carry store of Bharti Walmart at Nidamanuru near Vijayawada. The NDA government had allowed FDI in wholesale trading. The Left does not accept that FDI in retail will bring down inflation because in organised retail, prices are always raised to maintain profits when sales drop.
THE decision of the United Progressive Alliance (UPA) government to roll back its proposal to bring in foreign direct investment (FDI) in the multi-brand retail sector is attributable to several factors, which include the consistent and sustained opposition by the Left parties. In 2005, when there were attempts to resurrect the idea, following unsuccessful moves to push it by the previous government, the Left submitted a note to the UPA on the issue and registered its strong objections, following which the matter was held in abeyance. The Left parties felt the issue had been settled when, in 2009, the Parliamentary Standing Committee on Commerce, without a single dissent note, rejected the idea of giving permission to FDI in retail. But it was not to be.
The Left does not view the attempted and repeated bulldozing by the government as a stand-alone exercise. It sees this as a continuation of the strategic alliance that began with the signing of the India-United States nuclear deal and the visit of the Prime Minister to the U.S. "The Manmohan Singh government has been trying to introduce FDI in retail for the past six years, since 2005, when the strategic alliance with the United States was firmed up with his visit to Washington. One of the most important issues for the U.S. has been the entry of its companies into retail trade in India," said Prakash Karat, general secretary, Communist Party of India (Marxist).
He said that all the claims to justify FDI in retail were false. There were already 40 million people employed in the retail trade and the reality was that in the absence of any other employment opportunities, people took to petty trade. The entry of giant retail chains, he said, would end up displacing lakhs of small shopkeepers and traders. "According to our estimate, one Walmart supermarket can displace over 1,300 small retail stores and render 3,900 people jobless. For every job created in a supermarket, around 17 jobs would be lost in the unorganised retail sector."
The second argument, that it will tame inflation, was also an absurd one, he said. The sharp rise in global food prices since 2007 was attributable to speculative trading and an increase in control by multinational companies on the food chain. Everywhere, the experience was that wherever there was big, organised retail trade, prices were raised in order to maintain profits whenever sales dropped.
Karat said that the modern storage facilities that were being talked about would be for the benefit of the retail giants and not for the country as a whole. International experience showed that once giant retail chains established themselves, they dictated terms to farmers and producers. They set various conditions, because of which farmers and producers became captive to retail chains in the absence of alternative buyers. Karat blamed the National Democratic Alliance (NDA) for starting the whole process by allowing FDI in wholesale trading.
Interestingly, this was one issue that brought farmer and trader organisations on the same platform. The Confederation of All India Traders (CAIT), led by Praveen Khandelwal, called for an all-India traders' bandh on December 1, which was largely successful.
Several farmer organisations such as the All India Kisan Sabha (AIKS) and the Kisan Sabha, which is affiliated to the Communist Party of India (CPI), warned the government that any move to bring in FDI in multi-brand retail would jeopardise the livelihoods of millions of farmers and small, unorganised retailers. The AIKS pointed out how retail giants and seed monopolies such as Walmart, Monsanto, Cargill, Archer Midland, and ITC had been dictating government policies in agriculture. It said that the move was as much against the peasantry as it was against small retailers. "The government allowed middlemen entry and now they expect the giant retail chains to ensure proper price. Even with a minimum support price for 25 grain varieties, there is no procurement mechanism. Private traders procure at very low rates. We cannot expect companies like Walmart to give farmers good rates," said Vijoo Krishnan, on behalf of the AIKS.
Agricultural extension services had been outsourced, too, he said, and the experience of contract farming showed that there were drastic shifts in cropping patterns that would ultimately impact food security. Proposed laws such as the Seeds Bill and the Pesticides Management Bill were prime examples of the way in which monopolies were being encouraged in the name of quality and data exclusivity. "It is an admission of the failure of the government that it has not been able to control losses. It could have controlled this through agro-processing with cooperatives involving large sections of the peasantry," he said. A shift from something as innocuous as paddy cultivation to aquaculture might end up displacing hundreds of labourers, Vijoo Krishnan said. He felt that as there was a glut in production, especially of items like dairy products in the developed bloc, it was quite possible that giant retailers were interested only in finding a market.
PRAKASH KARAT, GENERAL secretary of the CPI(M), displaying the party's publication "Oppose FDI in Retail, Defend Indian Livelihoods" at its launch at a press conference in New Delhi on December 6.
Atul Kumar Anjan, general secretary of the Kisan Sabha and a leader of the CPI, told Frontline that he was not very confident of the rollback decision being a permanent one. "Remember, it was the BJP [Bharatiya Janata Party] that brought it in the Rajya Sabha, giving the same arguments of boosting jobs, etc. They voted alongside the Congress on the India-U.S. nuclear deal. It was because of the crisis within the UPA itself that the rollback happened," he said.
The government had done little to benefit farmers, he said. The lifting of controls on fertilizers had caused prices to reach unaffordable levels. The Ministry of Agriculture should be rechristened as the Ministry of Agriculture and Farmers' Welfare, he said. Interestingly, even the Bharatiya Krishak Samaj, the farmers' outfit owing allegiance to the ruling party, had offered only conditional support to FDI in retail.
Kavita Kuruganti, national convener of the Alliance for Sustainable and Holistic Agriculture, told Frontline that all the organisations represented by her alliance were against the government's FDI proposal. "It is a model that has not benefited traders or farmers anywhere. Even in contract farming where there were tripartite agreements and State governments had entered as third parties, farmers did not get the rates they were promised," she said.
In a separate statement, the central secretariat of the CPI expressed concern at the obstinacy shown by the Central government on the issue. It said that instead of taking corrective measures in an economy that was already in crisis, with all the eight basic sectors facing a slowdown, fiscal deficit soaring and inflation rising, the government was opting for a course that would ruin the lives of over a million retail traders.
Hazards in food security
"The entry of MNCs like Walmart will ruin the livelihoods of over a million retailers and also adversely affect the small and medium farmers as the retail MNCs will not only determine the purchasing prices but also attempt at changing the crop patterns. It may lead to serious hazards in ensuring food security to our people. Jobs are being offered to Americans by snatching jobs from Indians. The government is trying to hoodwink the gullible by claiming that the MNCs have to procure 30 per cent of goods from medium level I factories. The decision is not India-specific and MNCs can procure even this 30 per cent from anywhere in the world. This will ruin our small-scale industries that are already in crisis due to double dip global recession," it said.
It also demanded a review of the earlier decision to allow 100 per cent FDI in single-brand retail trade as well as "cash and carry projects" as they too were harming small-scale industrial units.
In a statement issued by its Polit Bureau, the CPI(M) noted that the government appeared more eager to meet the demands of the U.S. and other Western governments and serve the interests of MNCs such as Walmart, Tesco and Carrefour rather than protect those of its own people. The conditions imposed by the government were insignificant and meaningless. So was the investment floor laid down in the proposal. The giant retailers were all multibillion dollar companies.
"The restriction of foreign retail outlets to cities with over 10 lakh people is also meaningless because those are precisely the places where the MNCs want to go to tap the lucrative segment of the market. The big cities are also where small retailers are mostly concentrated," the statement read.
"Ninety five per cent of the 1.2 crore shops were run by self-employed persons, each on an area less than 500 square feet. These small shopkeepers in the urban areas are going to be hit the hardest with the entry of the MNC retailers. International experience shows that supermarkets everywhere invariably displace small retailers. Small retail has been virtually wiped out in the developed countries like the U.S. and in Europe. South-East Asian countries had to also impose stringent zoning and licensing regulations in order to restrict the growth of supermarkets, after small retailers were getting displaced," it said.
International experience also showed that procurement by MNC retailers never benefited small farmers. Allowing MNCs to procure was an attempt by the government to whittle down its own procurement responsibilities, it said.
In addition, small manufacturers would get squeezed and predatory pricing by MNCs would eliminate competition and establish their control over the supply of a range of commodities, including essentials such as food items. The domestic market would get flooded with goods procured from foreign countries. The claim that this would bring down retail prices for consumers was utterly bogus, it said. Instead, greater monopoly power and storage capacity for the big corporates will promote hoarding and profiteering.
The statement pointed out that the MNCs involved in cash-and-carry trade in India, permitted earlier by the government, had routinely violated the prohibition of selling directly to consumers. The regulatory measures based on a system of self-regulation were bound to be ineffectual as there was no mechanism to ensure enforcement.
For the moment, the issue of FDI in retail seems to have been settled. However, shocked reactions from the corporate sector and much of the mainstream media show that the battle is far from over. Definitely, the coming together of the opposition on this issue has been a relief to both the small and medium farmers and the trader community.
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