‘FDI will increase farmers’ earnings by 40-50 per cent’

P Chengal Reddy is general secretary of the Consortium of Indian Farmers Association (CIFA)—an organisation that claims to represent 40 million farmers. He is also part of the league that supports FDI in retail sector. He spoke to Jyotika Sood on how FDI can help Indian farmers.

By Jyotika Sood
Last Updated: Saturday 04 July 2015

P Chengal ReddyWhy do you support FDI in retail sector? How will it help farmers?

We have to accept the fact that foreign direct investment (FDI) is beneficial to all the farmers, especially for around 600 million farmers who have small land holdings. The general method of selling produce in the market is through mandis where farmers fall prey to commission agents or arhtiyas. The existing arhtiya or dalal system is highly exploitive and monopolistic in nature. The agents form cartels and manipulate prices. They charge 10 per cent commission and then deduct 10 per cent of price on the pretext of bad quality. The illiterate famers get cheated. FDI will help develop alternative marketing channel for the farmers to sell their produce.

The entry of big retail chains would mean steady supply of agricultural  produce like vegetables and fruits. Do you think Indian farmers can meet the demands of these corporate retail chains?

Farmers can beat the challenge by forming producer groups. The concept is already being implemented in India by the Centre under a program called Agriculture Technology Management Policy (ATMA), which helped establish commodity interest groups. These groups are supported by the agriculture department and that help them obtain quality seeds and fertilisers. These producer groups or commodity interest groups are constantly advised by block technology management teams also on quality parameters.

Steady supply would also mean going on with legal/illegal arrangements of companies with farmers. Don't you think it will increase corporate farming in India?

No, there is no scope for corporate farming through FDI. Producers’ groups can enter into legal Memorandum of Understanding (MoUs) with retails companies. The MoUs should have legal arrangements for backward linkage through which the retailer will supply seeds, fertiliser and extension services. The MoUs should also contain provisions on price regulation where the producers will be paid a minimum guaranteed price and other facilities like crop insurance. Besides, packing and grading will also be done at the farm gate. In return, the producers should maintain quality and adopt the conditions of the MoU. The agreement can be on a yearly basis or long-term basis. Our organisation CIFA has suggested that a regulator be appointed to monitor misuse of such arrangements by both the sides.

How can you assure that farmers would get better prices from big retail chains?

To sustain themselves in the market, retailers would require continuous supply of quality agricultural produce on time. They have to establish backward linkage without which they cannot meet the demands of consumers. The farmers will certainly get fair prices. They will also save on commission charged by arhtiyas, transportation cost and a day’s labour. The total saving will be around 40 to 50 per cent.

How many farmer groups are supporting you?
CIFA has a membership of 40 million farmers through 350 associations spread across 12 states. Our association represents all the sugarcane growers and a large number of paddy, wheat, cotton, chilly, tobacco and onion farmers. Our organisation also represents horticulturists especially farmers growing mango, vegetables, coconut and apple. The coffee and rubber farmers of Karnataka, Kerala and Tamil Nadu are also a part of CIFA.

According to you which are the states where farmers can support FDI?

Horticulture farmers in Maharashtra, Gujarat, Andhra Pradesh, Tamil Nadu, Jammu & Kashmir, Kerala and Uttar Pradesh will support FDI for their products like fruits, vegetables and spices. Subsequently, farmers growing special varieties of rice, wheat and Bengal gram are also for it.

Small farmers in India don't have resources. One of the fears is that they'll fall prey to competition and end up in a tragic trap. What do you think?

Nothing can be more exploitative that the existing dalal system. Small farmers do not get credit from government banks. Only 35 per cent of farmers are getting bank loans. Tenant farmers do not get any facility at all. They depend on moneylenders for credit. The advantage of producers groups and linking them with the retails chains is that they give group guarantee and ensure minimum secured prices.


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  • While I agree with the intent

    While I agree with the intent of the of the article - to get the farmers point of view on this issue, I find some of the questions really strange.

    For example :
    Steady supply would also mean going on with legal/illegal arrangements of companies with farmers. Don't you think it will increase corporate farming in India?

    First of all, what illegal arrangements are you talking about ? I fail to understand.

    And why would FDI in Retail lead to illegal arrangements of companies with farmers ?

    Would be glad if the reporter could explain.

    Questions should be open ended, and should not impose the reporter's views or biases.

    Posted by: Anonymous | 8 years ago | Reply
  • Down to Earth does not have

    Down to Earth does not have an agenda on the issue of FDI in retail. The interview with Mr P Chengal Reddy was carried to give the views of big farmers since we had published two articles on the vulnerability of small cultivators to the operations of retail chains. This is in keeping with DTE's policy of reflecting conflicting points of view.

    As far as illegal arrangements are concerned, you may not be aware that much of the corporate farming in India (by retail chains and others) is based on oral arrangements, with no legal contracts between companies and farmers. Since, there is no legal document between the company and the farmer it becomes an illegal arrangement as per the  APMC Act. I should have clarified this for the lay reader. 

    Posted by: Jyotika Sood | 4 years ago | Reply