When both the ends meet – big retailers and small farmers

Context

• The growing effects of the Indian grocery store brings with it golden opportunity for the small farmers.
• From strengthening infrastructure in the farm sector to a more organized food supply, the farmers stand to benefit the most.

Introduction

• With rapid urbanization, population growth, and rising incomes, is the increased demand for food in cities that is affordable and safe.
• As India liberalize its market and open the economies to foreign direct investment, international capital has been flowing on an unprecedented scale into the agro-food sector to meet this high demand.
• A key feature of these investments is the transformation of agricultural marketing systems—the services and activities involved in bringing an agricultural product from the farm to the consumer.
• Large retailers increasingly have dual objectives within these new, retail-led agricultural marketing systems:
• Increasing efficiency, tractability, and
• Creating value along the food supply chain.
• Companies aim to accomplish these goals by sourcing “directly” from farmers.
• The opportunity for these developments to benefit small farmers in the developing world has appealed to regional and national governments in Asia, Africa, and Latin America as a strategy for fostering rural prosperity.

Merits

• The most important development of modern supply chains in the agricultural sector, which is currently fragmented and bridged by middlemen; which means that there is a huge gap between wholesale and retail prices, and farmers don’t profit much even when their produce is sold at a high price.
• New agricultural marketing systems with more direct sourcing from the farmers could mean higher incomes for farmers.
• This higher income of the farmers in turn means more resources for farm investment in new technologies and assets.
• Direct sourcing is importantly a direct pathway out of poverty.
• A number of large-scale food retail companies also see the new systems as a double win,

beneficial for the farmers and good relations with regional and national governments.

Initiatives

• In May 2017, the Union cabinet cleared Rs 6, 000 crore scheme for agro-marine processing and development of agro processing groups called SAMPADA.
• The Indian government had announced plans to set up 100 integrated cold chain projects for perishable items.
• Amazon has sought government approval to invest $515 million (Rs 3,370 crore) in India over five lion years as the e-commerce giant seeks to enter food retailing through its online portal as well as brick-and-mortar outlets.
• Moreover Food processing minister of the country, Harsimrat Kaur Badal, said that, Grofers and Bigbasket are interested to bring in foreign investment into food retailing, where India in June, 2016 lifted restrictions on overseas funding.

Suggestions Government:

• Investments in better storage facilities and an overall tightening of the supply chain can go a long way in preventing massive food wastage, bringing down food inflation and also preparing the Indian farm sector for more exports.
• Improvement of road access and water supplies for agricultural production Infrastructure development can serve as a means to facilitate greater supply chain participation among small farmers.
• Maintaining small farmer access to land and credit is important to ensure that small farmers participate in new markets.
• Investments in the traditional market system may also offer a pathway to increasing small farmer outcomes. These investments could include expanding credit opportunities for rural traders or investing in traditional wholesale and wet markets by improving the condition of market buildings, storage, and water and sanitation

Companies:

• By paying farmers a purchase price between an agreed-upon minimum and maximum, companies can provide farmers with a measure of protection against the price volatility that vexes the traditional horticulture market.
• Firms should be aware of opportunities to design sourcing strategies that encourage the participation of women in supply chains.

For example:

• Employing female extension officers or buyers could be an appropriate and impactful way to involve more women farmers.

Conclusions

• As big retailers make their way into the Indian FFV (Fresh Fruit and Vegetables),
  

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