Forward block

By Maureen Nandini Mitra
Published: Monday 15 December 2008

-- (Credit: DIVYA) Retail off-limit for German wholesale giant, but West Bengal traders are wary

German wholesale major Metro Cash and Carry recently ran into rough waters in Kolkata when Forward Bloc leaders tried to block the renewal of the company's Agricultural Produce Marketing Committee (apmc) licence. It allows corporates to buy farm produce directly from farmers. The party claimed the licence would hurt small and medium traders in and around Kolkata. After several rounds of discussions with company officials, the government granted the licence, but with conditions. The fracas, though, underscored local traders' persistent fears of being pushed out of business by giant corporates.

Agriculture minister and Forward Bloc member Naren Dey had demanded guidelines be set for Metro in order to protect small traders. He suggested a minimum order of Rs 5,000 and a ban on contract farming. This would automatically ensure the small traders' role in the supply chain as few farmers are capable of supplying in bulk. After much back and forth between the Left Front and Metro officials, including a threat to do a Nano-like pullout by the German company, the government settled for a minimum order of Rs 1,000; bans on contract farming and direct retail business; it restricted Metro's customers to only traders who have a marketing licence from the state's agriculture and marketing board.

Metro now plans to set up at least four outlets in Kolkata at an investment of over Rs 400 crore. The first outlet, scheduled to open in December, will stock up to 8,000 food items and 10,000 other items, which it will sell to hotels, restaurants, caterers, corner stores and other retailers. It will source over 90 per cent of the products locally, from agricultural, livestock and dairy farmers, fisherfolk and manufacturers. Naturally, this will put Metro in direct competition with traders and suppliers comprizing a vast unorganized sector.

The Federation of West Bengal Traders' Association claimed this would affect the livelihood of 20 million people--traders, middlemen, unskilled workers--employed in the supply chain. "Entry of big players who will source products directly from farmers will simply destroy this chain," said Gautam Singhania, chairperson of the association. Local suppliers labelled the deal a "blunder". The licence, they said, would enable Metro to start a retail business that would undermine their own businesses in the long run.

"Small traders like us will gradually be eliminated," said Shyam Sundar Agarwal, a salt wholeseller in north Kolkata's old Posta Bazaar, a major wholesale market. "The government only listens to big companies. Small and medium traders and farmers constitute over 50 per cent of the unorganized retail and farming sector, creating jobs and offering services," he added. But many vendors and retailers are getting themselves registered as prospective Metro clients.

"I source vegetables from traders in Sealdah and other places in North 24-Parganas district. I expect to buy some good quality supplies from Metro when it opens," said Tapas Bhaumick, a vegetable vendor in south Kolkata. Farmers believe Metro will give them better deals. "Right now, we are totally dependent on local traders who are not always reliable," said Mohammad Gyasuddin, a farmer in North 24-Parganas. "They manipulate the markets to keep prices down and purchase goods from us cheap; sometimes they let our goods lie and rot to inflate prices for customers. Metro would be fairer."

The state officials said enough restrictions had been imposed on Metro to protect small businesses. "We have made it clear that Metro will not enter the retail business or contract farming, in fact we are opposed to foreign investment in retail," said Naren Chatterjee, chairperson of the Marketing Board. "Those protesting are local wholesellers most of whom operate without a trade licence." Unlike most other states, wholesale trading in West Bengal is not limited to state regulated wholesale markets (mandis). This means wholesellers can operate from any location of their choice and this makes it difficult to keep a tab on them, explained Bimal Pande, the board's secretary and vice chairperson.

Joyshree Roy, an economist with Kolkata's Jadavpur University, said the big chains will introduce healthy competition, help earn more revenue and bring transparency to the supply chain. Brushing aside job loss fears, she said there was no threat to small traders over the next 20 years, at the very least.

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