Myth No. 1: Large retail is good for farmers

This mass scale retail organization is and will ultimately be bad for Farmers. Of course, the benefits and its impact on the farmer will be directly proportional to their status in land-holding and livelihood.

You can be very sure of one thing: mass scale organization of retail will always be bad for a small farmer with small landholdings.

1. Large retailers for the sake economies prefer contract farming. Large retailers usually have a very specific demand for vegetables and fruits. Not every mango is a mango, and not every rice is the rice they would prefer.

2. Farmers risk by growing a very select variety of fruits and vegetables. There may be no other demand for that produce other than the consumer / retailer who has ordered it. Hence the farmer becomes "associated "with it.

3. GM and hybrid crops are the favorites of large retailers due to longer shelf life. So if you want to grow and sell some indigenous varieties, you most likely will not get the shelf space to do it.

4. The retailer’s goal will almost always be on quantity of the produce and not on the health aspects of the produce. So, don’t go looking for organic produce, zero-chemical zero-pesticide produce and even different varieties of produce. 

5.. The Consumers must pay through ‘extra’ to gain access to organics, zero-chemical or even get the varieties of fruits / vegetables that the retailer does not prefer.

6. Farmers will more likely end up cropping – aggressive chemical-based a single cropping, with a sole buyer in mind. The long term affects on land, soil fertility and ground water consumption is usually not a concern for the buyer.

7. There are several farming avenues that are more lucrative than selling to retailers. They include for instance producing for exports, producing herbs and medicinal plants, Floriculture, spices etc. These produce will not have sales on a retail store, however if a farmer falls for a “fixed income” theory, they may lose opportunities. Hopefully, such a mis-selling of contract farming would not happen.

8, The cold storage and warehouses that MNCs are expected to build are not community facilities. They will be accessible only to the farmers who are producing goods for the said company. In case, these are third-party entities, the demurrage will cost a bomb for these small farmers. 

8a. The moral being: Government cannot wash off its hands of its responsibility building community warehouses / cold storage facilities by "handing" it over to private investments. Cold Storage / Warehousing were one of the first things that were completely liberalized in 1990s - yet we barely see any private sector units!

8b. It is also very likely Large retailers with good technologies and supply chain will go Just-in-Time SC to provide "Fresh" produce. I.e. the storage facilities may not be built at all, or may be just sufficient to suit its purposes.

Of course, there will be some odd good apples, some good companies which have helped educate farmers and make it a win-win-win situation. But by the basic economics of it, it will be a small niche segment of retailers.

The Divide

And to the worst part:

The consumption of the retailers is usually in quantities that no farmer(s) can provide. At the same time, there have been no instances (at least that I am aware or read of) where companies setup a collection point to source the produce. The co-operative style of sourcing is very expensive for retailers. And as long as it is not a co-operative system, the major beneficiaries will always be the large land holders.

The opening of retail is very beneficial to the large land holders – farmers and plantations, who will going forward will have a very definite buyer of goods. For the small farmer, there would be no ‘retail’ system which will buy even if he produces the same varieties, mostly due to "quality" reasons. Also price paid to such a local vendor would be less than what ‘empanelled’ farmers would be getting.

The major causes of this lack of equitable dispersion are

1. Lack of Land reforms, and hence very small farm holds.

2.  Inequitable distribution of irrigation facilities

1. Rural India mainly suffers due to small land holdings which make it impossible / unviable to scale up or use modern machineries.

2. Irrigation is the great divide of rural India. Some areas are well irrigated by natural causes or by irrigation canals. While a majority of the farmers still end up depending on monsoon, rains and groundwater. This divide is worse than the caste systems that plague our rural countryside, because it effectively controls how much a person can earn from his limited resources.

Why Subsidize?

Another pertinent question that will come up sometime, for sure, is whether government and its taxpayers should incentivize and subsidize the agriculture, if that agri-produce is effectively ‘locked’ for the consumption of the private parties. On what basis can such subsidies (public funds) be given to a farmer who is effectively working for a retailer, a private for-profit enterprise?

Farmer Co-Operatives

The best way out for these ill-effects is for farmers to setup co-operatives which in turn should sell to retailers. For the efficiency minded retailers its an added inconvenience but there are several advantages in long-run ensure the society grows together. 

However in this case, Retailers are not the only people who will loose their competitiveness, it is also the biggest of the farmers who would prefer not be under a co-operative structure. The production costs of each of these different section of farmers would be different and hence the structure cannot sustain long (?) However, it would be nice if some retailers give it a try.

Conclusion:

So, instead of asking “How does the farmer benefit” we should ask the more pertinent question “Which farmer benefit most and who doesn't derive any benefits at all?” If you can answer this, you will see the rich-farmer lobbies will support the FDIs and while the poor farmer lobby will be oblivious or unaffected by this "heavenly gift".

The larger section of farmers would be unaffected by these glorious reforms, basically because it will barely have any effect in short term and hopefully beneficial outcomes in longer term.

I will be very happy if all these criticism were to go wrong and rural India prospers but thats a little hard to digest. Its more likely to go wrong.