If allowing some more items can help us get higher realisations for farmers, better investments in infrastructure and modern technology, then there is no harm in it, believes union minister of food processing, Harsimrat Kaur Badal. In an interview with Banikinkar Pattanayak, besides the FDI in food policy, she also discusses the building of food parks, cold storage and her plans to build a cold storage grid. She throws light on the idea behind the World Food India, to be held on November 3-5 in New Delhi.
You have held discussions with major global retailers like Walmart, Tesco, Metro Cash & Carry and Auchan. What has been their response to India allowing 100% FDI in the marketing of locally-produced food items?
Allowing 100% FDI in marketing of food items produced and manufactured in India was a landmark decision. After that, our aim was to attract foreign companies to set up shop in India. I went to the UK, France and Italy, and I saw interest shown by global players in not just investing in retail, but also making India a sourcing base for their units. Companies in Japan are looking at more vegetable (including frozen and ready-to-eat items) supplies from India, apart from shrimp. Even companies in the UAE want to make India a sourcing destination. We have a $600-billion retail sector, with food accounting for a major chunk of it. Already, $695 million has been committed by Amazon, Big Basket and Grofers in food retail, and certainly more players are interested.
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What did the big retail chains tell you?
They said if they are allowed more items, apart from food, they will just have to replicate their existing models in other countries and can move faster in setting up outlets. Otherwise, they have to go through their boards, create a new model for India and carry out due diligence of the financial viability of that model. They said the margin is very low in food items, which won’t allow them to invest and create massive infrastructure required to set up proper outlets. Usually, they balance the outgo in terms of investment in food retail through the sale of non-food items (in case of the latter, the margin is better). At the same time, the consumer would like to explore as many items as possible under one roof. So, along with food items, if domestically-produced beauty care products, kitchenware, etc, are added, more foreign investments, to the tune of $10 billion, could flow in the next few years.
What changes in the FDI policy for food retail have you suggested to the PMO?
My suggestion was that since our objective is to double realisations for farmers (today, 80% of our cold storage facility is limited to just one commodity—potato), we have to get massive investment in infrastructure, especially at the farm-gate level, access modern technology and facilitate more direct tie-ups between farmers and large corporations. If allowing some more items—that too domestically-produced—will help us achieve that, what is the harm? So, I have suggested that whatever amount the foreign retailer invests at the farm-gate level, the sale of additional items worth 20-25% of that investment be allowed to the retailer as a sweetener. Ultimately, this will work out to around 5% of the total FDI (considering that the retailers will invest around 20% of the FDI in creating such infrastructure), which is fine. One day, it’s going to happen anyway. It’s just that if we allow them now, the retail landscape will change at a fast pace, benefiting farmers the most. CIPHET conducted a study that showed farm and food items worth `92,651 crore are wasted every year during and after the harvest. Can a country like ours afford such huge wastes of food items? We are only at 10% (processing capacity) today, so there is a huge scope for everyone (foreign and domestic players) to co-exist. Also, if the retailers come in, even machine manufacturers and others in the value chain will expand their presence. More important, farmers will benefit from the prospects of tie-ups with companies, which may educate them on best farm practices.
A company in Japan (Kagome), which aims to be the tomato king of the world, wants to come and partner with our farmers. So imagine the farmers, who sometimes have to throw their produce because of a plunge in prices as they don’t want to waste money in transporting it to markets, getting assured buyers, who are also willing to give them quality seeds and access to modern technology and best practices.
You have mooted the idea of creating a cold chain grid. What shape will it take?
We recently sanctioned 101 cold chains to create additional capacity of 2,76,000 tonne of cold storage/controlled atmosphere/frozen storage, with Big Basket, Amul, Haldiram and Falcon Marine Exports featuring among the dozens of eligible companies that will be awarded government grants to build them. It is for the first time that the government has awarded many cold chain projects at one go. The investments on these projects will be to the tune of Rs 3,100 crore, including the government grant of Rs 838 crore. The rest—over `2,200 crore—will be invested by the companies concerned. These cold chains and the 42 mega food parks are going to help 15 lakh farmers and create employment for 3.5 lakh people. Subsidy will be around `3,000 crore, which will leverage infrastructure to the tune of Rs 15,000-16,000 crore. Now, we are coming up with a scheme—SAMPADA. Through technology, we are working to map the clusters, such as chilli cluster, marine cluster, etc, throughout the country and map the infrastructure available for storage and processing. Then, in a targeted fashion, we will give out contracts whenever we want to build more cold chains, depending on the requirements of the area. The idea is to create a cold chain grid, a processing grid, a lab grid (where quality of food items can be tested), etc.
How do you compare your tenure vis-a-vis your UPA predecessors’?
Look at the two flagship schemes—mega food parks and cold chains. These schemes started in 2008. A total of 42 mega food parks were sanctioned by the UPA, which were supposed to be ready in 24 months. But when I took over in 2014, only two parks were operationalised. At least 17 of them didn’t have a brick and one of them happened to be in a VIP constituency (Amethi) where only three months before the elections, the inauguration stone was laid. So, only two parks were set up in the six years of the UPA, while we have already got six parks operational and another four are ready for inauguration. So, in three years, we have 10 mega food parks. Similarly, only 37 of the 97 cold chains that were earlier sanctioned were set up during the UPA regime; we have set up 60 in just three years.
By when do you expect the review of the FDI policy to be announced?
I hope it comes before the World Food India fair in November. If relaxation is granted, it will set the stage for massive investments to come in.
How will the World Food India fair help?
I thought of a platform where both foreign and domestic players will have an opportunity for match-making. Also, farmers, farmer-producers organisations, machine manufacturers—all stakeholders in the value chain—will have opportunities to come together and talk serious business. So, we are organising the World Food India fair, a first of its kind, from November 3-5 in Delhi. We are also targeting doubling the processing level from the 10% to 20% by the time we complete this term (in 2019).
What about the Rs 2,000-crore fund under Nabard for lending to food processing industries? How much has been sanctioned?
Nabard gives cheaper credit at 8-8.5%. The only problem we had with Nabard initially was their stringent paperwork. One of the conditions was that whatever was to be borrowed by a person or entity, they had to give collateral worth one-and-a-half times of that, which was crazy. I had already taken up the matter with them. As much as Rs 500 crore has been sanctioned out of the Rs 2,000 crore.