With most retailers favouring the idea of throwing open the sector to foreign direct investment in multi-brand retail, a recent research by the research agency Crisil says that the entry of FDI in multi-brand retail has the potential to bring down prices of perishable goods like fruits and vegetables over the long term. It adds that an efficient supply chain will enable large retailers to source fruits and vegetables directly from co-operatives, lowering annual wastage amounting to around Rs 63,000 crore.
Nagarajan Narasimhan, director, Crisil Research, said: ?The wastage in the supply chain and commission to trade intermediaries inflate the final price paid by Indian consumers. They shell out almost 2-2.5 times the price a farmer gets as compared to 1-1.5 times in developed markets where penetration of organised retail is much higher.?
The research estimates the entire investment to set up the supply-chain infrastructure for fruits and vegetables would be close to Rs 65,000 crore over the medium term. This estimate takes into consideration the number of cold storage facilities and refrigerated trucks that would be required for handling of perishable goods.
About 30% of the country?s total production of fruits and vegetables is wasted every year because of inadequate cold storage and transport facilities. Reckons K Rajagopalan, chief executive officer officer, Retailers Association of India, ?By bringing in specialised experts into the supply chain, wastage can be reduced by 15%. Moreover, since there will be less people in the chain, economies of scale for a modern retailer will increase, giving a further boost to operating margins.?
The report also suggests that reducing commission of trade intermediaries will improve realisations to farmers and increase operating margins of large retailers.
Damodar Mall, director of food strategy, Future Group, said more than the supply chain wastage, the adverse practices affect the quality of fruits and vegetables, ?The more hands the goods change, quality available to consumers become lower. Hence, it is more about intermediaries that will be scrutinised by the entry of FDI into the retail sector.?