Leave alone allowing and facilitating foreign direct investment in multi-brand retail, many state governments are following archaic legal framework that comes in the way of even domestic organised retail chains procuring agri-products from farmers and help reduce inflation in food articles, reveals a latest study by industry body Assocham.
“Much more investment would have been possible in the domestic organised retail if only it was easy to procure directly from farmers. Even for companies like ITC which have done a credible work in its rural inter-face through initiatives like e-chaupal, it is extremely difficult to procure wheat since they need individual licence for each of the mandis in the state. This is so in several states which do not give one licence for the whole state. If a company wants to procure grains from 50 mandis it will need 50 licences”.
This cumbersome rule discourage the organised retail to flourish since an efficient supply chain is an integral part of the organised retail and not just a front end, the chamber said.
Making out a strong case for reforms in agri procurement through scrapping of the Agriculture Produce Marketing Committees (APMC) Act, the Assocham said cumbersome rules discourage the organised retail to flourish since an efficient supply chain is an integral part of the organised retail and not just a front end.
The Agricultural produce market committee (APMC) Act has resulted in cartelisation of Mandi intermediaries, known as ‘Adtees’ who fleece both consumers and the farmers. “We need to scrap this cartel and help farmers establish a direct contact with the well-organised retailers,” Assocham President Rana Kapoor said.
He said without these basic reforms in the state laws it would be extremely difficult for any global retailer, which has a well –integrated supply chain to set up stores even if a particular state allows FDI in multi-brand retail.
The Assocham also sought a clarity on the environmental laws and notifications which lack clarity. For instance, uner the new environment regulations in Western Ghats, some industries will be discouraged whether food processing industries will be discouraged or not. There is no clarity. The impact of the lack of clarity is creating confusion in states like Maharashtra and Karnataka which are very active in producing and processing horticulture products.
There is also an immense amount of entrepreneurship in these states and the overall business environment is conducive for the food processing industries to whom banks are willing to lend. However, uncertainty following new environment laws in Western Ghats is creating risks for the businesses.
Different states have different rules in regard to food industries. “A company operating pan-India has to deal with different rules, at times quite opposite. Here the role of central agencies is crucial in terms of facilitating uniformity of rules among states”, the Assocham said.
It said while the food sector is related to health and well-being of people, the number of clearances and compliances required are far too many for the industries to focus on their core businesses.
The safety standards are too complicate to implement and are not only focussed on the health issues. The industry is also not sure whether the Goods and Services Tax will operate.