1. Editorial: Horse before the cart

Editorial: Horse before the cart

Food parks won’t take off till organised retail does.

By: | Updated: March 28, 2015 1:25 AM

Given how India processes just around 2-3% of its fruits and vegetables compared to the global norm of 40%—post-harvest losses are reckoned at Rs 2 lakh crore annually—the government has done well to try and promote this by deciding to set up 17 food parks across the country. Setting up the parks involves an investment of just R6,000 crore, but the benefits are large, whether in the form of more farm jobs, building a nationwide cold chain or a string of food-processing plants. Five state governments—Punjab, Haryana, Telangana, Odisha and Andhra Pradesh—have been allocated one food park each, while Kerala will have two. The rest will be set up by private companies, including the Adani Group and Ruchi Soya. If successful, the food parks will help reduce food wastage, leading to higher efficiency in agribusiness. That will provide increased earnings for farmers while building an efficient supply-chain. Most importantly, the food parks are projected to provide jobs for an estimated 2.5 lakh people and generate higher revenues for 12.5 lakh farmers. It will also change the dynamics for farming in India. Currently, for every $1 of agricultural output, the incremental agribusiness in India is just $1 against $11 in the US.

The problem, however, is that the concept of food parks is not new, and the government has given incentives to set up cold chain networks for years now. The reason why this hasn’t really taken off so far is that for any back-end investment, there has to be a robust front-end for selling the produce. This is where organised retail, and FDI in it, comes in. Large investments in cold chains will be made only when there is a large buyer of the end products. And, without the expertise as well as the deep pockets that foreign retail chains have, organised retail hasn’t really taken off in the country so far. At some point, the government will have to address this reality and allow FDI in retail. To cite an example from another area, the government has done a great job in setting up Jan Dhan bank accounts with an overdraft facility, but unless these bank accounts start getting money from direct cash transfers, the entire scheme of financial inclusion is in danger of falling on its face. No programme can succeed until all the elements are in place.

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