December 07, 2011

FDI in retail: Back to Champaran

Sandhya Jain
06 Dec 2011

A profit-sucking corporate food chain; contract farming and mono-cultivations displacing crop diversity; farmers reduced to bonded labour of 21st century clones of the East India Company – such will be the face of Indian agriculture if we let the UPA impose the disastrous policy of FDI in retail.

It is unbelievable that a regime could be so divorced from history as to foist upon its people the sufferings that blighted the lives of Champaran (Bihar) farmers barely a century ago, when the British forced them to grow indigo instead of food crops, and monopolized the production, marketing and profits of the expensive dye.

This dictating of the terms of ‘free trade’ is the essence of colonialism, and the world is once again facing this menace. Libya’s Muammar Gaddafi lost his power and his life only because he wouldn’t sell his nation’s oil at the price determined by western multinationals in order to maximize their gains at the expense of the Libyan people. Saddam Hussain of Iraq met the same fate for the same reason.

FDI in retail will devastate the Indian economy. There is no merit in the claim that consumers or farmers will benefit from multinationals (or even Indian corporates) establishing monopoly control over the retail sector. Even FDI backers do not claim there will be jobs for the 44 millions of small retailers and hawkers thrown out of business. Anyone who has observed the so-called sunrise industries in the past decade will notice there have been few jobs with salaries and benefits. Instead, thousands of youth across the country were lured to rake in customers and profits for the corporates, in lieu of small incentives, which made the work extremely exploitative and tedious.

There is a chant about ‘elimination of middlemen,’ as if that mystically translates into value addition and lower prices, and as though middlemen performed no legitimate role in garnering remote farm produce to city tables. It is a canard that large corporates alone can bring better technology and inputs through contract farming; how much did the old zamindars invest in agriculture, and what did they leave the farmer? Equally specious is the argument that corporates will reduce wastage by investing in infrastructure; they will build cold storages to enhance monopoly control over national food supply. What we need is village level cold storages, run by solar power or other forms of alternate energy to make them viable.

Instead we get gigantic duplicity. First the state needlessly monopolizes everything in the name of public good, giving us decades of wasted growth, corruption, et al. Then it mindlessly sells huge public assets at throwaway prices – in the name of ‘efficiency’. But when the crony capitalists say they can’t run the electricity grid or the airlines despite getting the best routes at the expense of the national carrier, they are not re-nationalised, or allowed to wither away. Instead, the government tries to put public money into their pockets. The economy has become a ping-pong ball between Government and Corporates.

Government knows FDI in retail will give multinationals direct access to local farmers, and put farmers at the mercy of MNCs which will get control over the food chain. The MNCs will dictate terms of contract farming, supposedly to guarantee purchase of farm produce and ensure quality. Actually, they will impose ‘exclusive’ contracts to debar farmers from selling to other agencies [bonded, not free trade], and acquire monopoly control over the entire produce at prices consistent with their profit margins. In Jaipur, a multinational firm clinched a lucrative deal with 250 egg wholesalers for supply of 5 lakh eggs daily, with the stipulation that they no longer sell eggs to retailers. This puts the humble hawkers who sell eggs at street corners out of business, while doubling the price of eggs at large malls.

Similarly, ‘quality control’ gives MNCs the right to reject the produce. More dangerously, it gives them the right to dictate the seed, crop, fertilizer inputs, etc. Thus they can, Champaran-style, force farmers to switch from food to cash crops, and by dictating the fertilizer or pesticide, ruin the fertility of the fields.

Several studies have shown that the switch to cash crops enhances the risk to the farmer (recall the cotton farmer suicides), while the need to buy their own food affects the family’s nutritional standards. Also, over time, corporates tend to favour certain types of crops to maintain commercial viability; this leads to a preference for staples like rice and wheat and shunning of nutritious grains like ragi, maize, millet, bajra, which affects crop diversity.

An aspect of intrusive farming is the credit extended to farmers by MNCs, the terms of which could aggravate default and farmer suicides. FDI in retail allows MNCs to transfer all risk of production to the unprotected small farmer, while keeping a tight control over profits. This could cause virtual bondage, as happened to opium farmers under the British Raj.

A corollary to the emphasis on corporate culture as the growth engine of the economy is disrespect for street hawkers who are integral to the urban food chain. Even as governments bend backwards to provide real estate to large corporates, or to housing projects for the rich or middle class, there is icy indifference to the poor. This manifests in a growing disinterest in providing housing for the poor, and a cussed determination to disallow street hawkers from selling their wares. Drives to destroy their produce by flinging it on the street or carting it away in municipal vans are relentless; recently hawkers have been driven away from Sarojini Nagar, Delhi, where they were so intrinsic to the shopping experience that regulars did not know what to do without them.

To clinch the argument about FDI and farm incomes, consider that until 1950, the average American farmer earned nearly 70 percent of every dollar spent on food. In 2005, this declined to 3 to 4 percent, though it should logically have risen with the elimination of middlemen. Only, the large corporates purged the chain of intermediaries and creamed off all their profits; the farmer remained at the bottom of the pile. FDI in retail can only help Western multinationals that have saturated their profits in their existing turfs. But why is the Indian government willing to push the farmer and retailer into the whirlwind?

The author is Editor,

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