Mike Duke, CEO of Walmart Stores, would like us to believe that allowing companies such as his to retail farm produce here will help control food price inflation, which is increasingly becoming a source of discontent among our people.Duke’s argument: A good part of our food produce is wasted as it travels from the farm to market, because we do not have a well-developed supply chain and adequate cold storage facilities. By allowing foreign investment in multi-brand retail, India will be able to tap into the expertise of global retailers such as Walmart and cut wastage of farm produce, which, in turn, will boost supplies and help contain inflation.
Several newspapers took Duke’s suggestion quite seriously. Some even headlined it, because they are as ignorant about the reality in their own country as a foreigner of Duke’s kind.
Duke is not the first to make such a suggestion. The ad campaigns by our homegrown retailers such as Big Bazaar and Reliance Retail also make similar assumptions.
That if consumption of potatoes totals 100 tonnes and the farmers are producing the same amount but are able to reach only 80 tonnes to market (because the rest is wasted in transit), then demand exceeds supply and triggers an increase in prices. Companies such as Walmart, Duke would tell us, will help ensure much than 80 tons actually reach the market, cut the demand-supply gap and reduce inflation.
If we, for a moment, concede ground to Duke’s line of argument, we may still ask what happens when consumption grows to 110 tonnes. Unless potato production grows to the same level, a gap between demand and supply could trigger a price rise. So the solution then would be to produce more, and I doubt if Walmart or other organised retail firms can help here.
The real problem lies elsewhere. Food prices are going up because cost of producing food is going up. Seed and fertiliser prices have gone up more 50 per cent in the past three years. Diesel prices and power tariffs have increased in a similar manner. Farmers are paying more and more for water, which until some years came almost free.
If that is not enough, hiring farm labour has become a nightmare for producers. Earlier this month, mills in Maharashtra agreed to pay cane-cutting workers 23 per cent more than the rate negotiated for 2009-10. As my colleague Harish Damodaran at Hindu Business line put it: “Sugarcane is not an exception: The story is the same, whether one is hiring hands for transplanting paddy, harvesting wheat, picking cotton or plucking apples. And it is not just labour rates, but actual scarcity.”
The only way we can contain food prices in the face of rising input costs is by enhancing productivity.
We need to figure out how to produce more with less water; how to mechanise production at a cost that is less than hiring labour. We will need to make technological breakthrough with respect to crop yield. I do not remember when was the last time we came up with a new variety of paddy or seeds for common vegetables, except for the controversial Bt brinjal.
It is a pity that focussing on the real problem is not a priority for the government, for our ministers Sharad Pawar and Subodh Kant Sahay, who are busy hosting visitors such as Duke. And then there are journalists like us who are always so ready to fall prey to fallacious recipes such as the one that came from the Walmart chief on Monday.
