Jai reform, jai kisan

Political disputes within the Bengal Left Front over renewing German wholesale retailer Metro Cash & Carry’s licence highlight a political economy puzzle that applies nationwide: those who shout loudest that farmers need a good deal are frequently the same people who protest loudest about big retail chains. Whether or not big retailers take business away from unorganised retail can, at a pinch, be debated — note, though, the ICRIER study on this showed coexistence is wholly possible — but what can’t be debated is that organised retail gives farmers a good deal. Farm produce in India currently suffers from rusty supply networks and shabby marketing, some of that done by state agricultural marketing boards. Typically, the transmission loss between farm gate and retail is very high and middlemen take most of the surplus. Plus, there is uncertainty for the producer because the system lacks forward planning. And there is no incentive to upgrade production methods to meet better quality standards. One doesn’t need to be a crop scientist to understand this. But which politician has ever stood up for the kisan’s right to expect that benefits from good economic management should reach him too?

There are around 7,500 wholesale agricultural markets in the country that are regulated by states according to the Agriculture Produce Marketing Committee (APMC) Act. This act allows states to issue licences and Metro Cash & Carry, a wholesale retailer, was being denied a licence renewal under the APMC laws. India’s wholesale markets are so inefficient thanks to poor infrastructure and produce handling that farmers’ effective income realisation is no more than 40-60 per cent. Among other reforms — the APMC act is supposed to be changed — entry of big corporate players in marketing is crucial because it will act as a force multiplier.

Bengal in particular should be very welcoming to retailers because its labour-intensive, rice-led farm sector growth has plateaued and it has been apparent for some time that agriculture marketing is a big problem in the state. Just as the decision to get big-ticket industrial investment in the state was the CPM’s strategy to counter flattening farm growth, encouraging big retail is also a reformist response. The CPM’s leadership understood what politicians nationwide need to say aloud: farming cannot be transformed in India in isolation from modern economic practices and farmers cannot have a better future in isolation; the supermarket is the farmer’s friend.