Undaunted by large-scale protests against organised retail chains in the country by local traders, the agriculture ministry has asked such chains to continue with backend operations of direct farm procurement. The ministry has also asked these chains to upscale their operations and supply fruit and vegetable directly to hawkers.
?We would want organised players to use their resources and provide to the hawkers. This would decrease the purchase price for hawkers and help share some cost advantage. Moreover, consumers too would benefit with an overall reduction in prices,? said a government official.
The official referred to a Crisil study saying intermediaries added almost 16% to the cost of an agricultural produce from the farms to the sub-wholesalers stage, from where a hawker bought his wares, thus increasing his cost of procurement compared to an organised retail chain.
Organised retailers have been able to bypass the intermediary links by directly procuring from the farmers through their farm procurement centres. This has enabled them to sell agricultural produce at rates lower than that of hawkers, who are dependent on the wholesale agents for procuring their share of the fresh produce.
Most retail companies, however, have to depend on state mandis to fulfill the need for their operations. Reliance and Subhiksha, two of the country?s largest fresh retail chains, buy up to 40% of their requirements from state mandis. However, they have been able to do that at very competitive rates as well through appointed mandi agents.
On its part, the agriculture ministry has circulated a Model Agricultural Produce Marketing Committee Act among the states that allows companies and traders to directly buy farm produce from the farmers.