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Old 29th November 2011, 21:56   #46
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Default Re: Foreign Direct Investment in the retail sector. Good or bad?

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Originally Posted by poloman View Post
We already have big local chains like Big Bazaar, Reliance Fresh etc Why are they not able to procure directly from the farmer? AFIK they tried and miserably failed.
Not really. Look at the model of punjab, where companies directly buy from farmers and its pretty much successful there.

Another important point mentioned in the policy and anyone coming for FDI will have to invest minimum 100 million dollers and 50% of this will have to be invested in back end infrastructure like cold storage, supplychain etc.

I really do not see any issue with this.
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Old 29th November 2011, 22:29   #47
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Default Re: Foreign Direct Investment in the retail sector. Good or bad?

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We already have big local chains like Big Bazaar, Reliance Fresh etc Why are they not able to procure directly from the farmer? AFIK they tried and miserably failed. Now you say MNCs are capable of doing this? How exactly?The reality is farming is totally unorganised in India with highly fragmented land holding. Do you think that Walmart or any one can directly approach and procure from millions of small scale farmers whose produce may be few hundreds of kilos. So they also will either go to established middlemen or import.
What are you talking about? Do you think farmers take their tractors and go door to door or shop to shop.
They go to Mandis.
First few days, they sit there, and refuse to sell grain at below Minimum Support price. The govt procurement agencies often do not have space for grain, so whenever there is a bumper crop they can pick up only part of it.
So farmers wait and wait, and grain rots. Then they sell it below MSP to middlemen.

Big Bazaar etc., do buy a lot of stuff directly from mandis. Thats why they sell their Atta cheaper than many other brands, and still make a killing in profit.
After more competition comes in, they will have to drop prices further.
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Old 30th November 2011, 00:44   #48
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Default Re: Foreign Direct Investment in the retail sector. Good or bad?

Competition is bad in a socialist country like ours. It is not fair to the underperforming small shops if they have to go out of business just because there is a successful new kid in the block. Or perhaps there should be a "QUOTA" system where apart from the 50% to be invested in the rear end, there should be a contribution of say 25% to be paid to the local shops in a 50 km radius (with appropriate caste based reservation).
And please don't forget the middlman. He is an essential cog in the democratic wheel of our country. Remember, between a producer and consumer, there are atleast 3 levels of middleman. It is not fair to remove these individuals from the equation. That would be oppression.
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Old 30th November 2011, 01:21   #49
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Default Re: Foreign Direct Investment in the retail sector. Good or bad?

To those of you with a point of view that allowing big retailers like walmart will increase employment please get a dose of reality by watching the documentary

The question is Why Retail? Why not other beading sectors like aviation? Let foreigners come and revive the non performing sector. National Security conncirns? Do we think we are less bugged now?
First you let the currency weaken and not manage it, then you let PDS System to totally collapse , Then you lobby with stockist traders and create demand and supply mismatch case, Increase petrol precises in quick succession ....Then you serve us all with "WOW we will have WalMart in our neighborhood"
How can we forget the HarleyDevidson case and the mangoes we traded? And the still continuation of the BlackBerry services?
I see all this as divergence tactics of Govt. Initially they wanted us to move away from CWG and its corruption. So media got another dose like 2G Scam. They kept it alive by keeping kanimozhi in jail. (I am not saying she is innocent ). Then after Anna Hazare agitation they abruptly increased fuel price so that we and media get a different topic to discuss. Another fuel hike followed when the earlier one was digested. Govt. after the Anna's agitation is in no mood to let us go back to the actual issues that they are not comfortable with.
Again every thing said above is my point of view and no one should take it personally.

Last edited by rohitbagai : 30th November 2011 at 01:34.
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Old 30th November 2011, 02:06   #50
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Lightbulb Re: Foreign Direct Investment in the retail sector. Good or bad?

PLEASE do not compare the situation here to developed countries.you're bringing nothing to the table just displaying our ignorance of local affairs.


Why do i want big players in the retail market?COMPETITON! anything that requires the local stores to pull thier socks up if the want to keep up.

I buy my meat from the nearly TATA owned superstore.why? anyone who has sourced chicken/mutton from local stores can tell you why.NO sense of hygiene or cleanliness whatsoever and ZERO customer skills. while and the supermarket the attendants have a refrigerated section and they handle the meat with gloves on.

We've given the local stores decades to ramp up.have they?the shops in my neighborhood haven't changed for the past 20 years except for the occasional coat of paint.age old storage techniques,rodents.take it or leave it attitude.and its not as if they're not well off,they're making quite a killing.
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Old 30th November 2011, 04:11   #51
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Originally Posted by Bluengel180
PLEASE do not compare the situation here to developed countries.you're bringing nothing to the table just displaying our ignorance of local affairs.

Why do i want big players in the retail market?COMPETITON! anything that requires the local stores to pull thier socks up if the want to keep up.

I buy my meat from the nearly TATA owned superstore.why? anyone who has sourced chicken/mutton from local stores can tell you why.NO sense of hygiene or cleanliness whatsoever and ZERO customer skills. while and the supermarket the attendants have a refrigerated section and they handle the meat with gloves on.

We've given the local stores decades to ramp up.have they?the shops in my neighborhood haven't changed for the past 20 years except for the occasional coat of paint.age old storage techniques,rodents.take it or leave it attitude.and its not as if they're not well off,they're making quite a killing.
Your argument is basically for the big format store. Why FDI?
You are already happy with TATA store it's a home grown chain
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Old 30th November 2011, 04:47   #52
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Default Re: Foreign Direct Investment in the retail sector. Good or bad?

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Another important point mentioned in the policy and anyone coming for FDI will have to invest minimum 100 million dollers and 50% of this will have to be invested in back end infrastructure like cold storage, supplychain etc.

I really do not see any issue with this.
Quote:
Originally Posted by rohitbagai View Post
Your argument is basically for the big format store. Why FDI?
You are already happy with TATA store it's a home grown chain
Look at the post above, that is why we need more of these apart from the home grown stores. The home grown ones are not investing in areas where it would benefit the whole country. They are investing in areas where there are more profits. So the policy constraints listed above would help.

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Originally Posted by wildsdi5530 View Post
Competition is bad in a socialist country like ours. It is not fair to the underperforming small shops if they have to go out of business just because there is a successful new kid in the block. Or perhaps there should be a "QUOTA" system where apart from the 50% to be invested in the rear end, there should be a contribution of say 25% to be paid to the local shops in a 50 km radius (with appropriate caste based reservation).
And please don't forget the middlman. He is an essential cog in the democratic wheel of our country. Remember, between a producer and consumer, there are atleast 3 levels of middleman. It is not fair to remove these individuals from the equation. That would be oppression.
Are you serious? Why should i pay for the middleman? What value they are adding in between to get a cut? Nothing.

I would rather pay to the actual producer so as he gets a fair share of his produce. Farmers are under huge debt and committing suicide i don't see middleman doing that or helping them in anyway. They are happily milking profits. I would rather not have them at all. Being a socialist country does not mean there could be so much difference between have's and have nots (One profiting big time and others living in constant starvation).

QUOTA? Why do we need quota system here, don't we have enough of that already?

Last edited by mayankjha1806 : 30th November 2011 at 04:54.
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Old 30th November 2011, 04:51   #53
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Originally Posted by mayankjha1806

Look at the post above, that is why we need more of these apart from the home grown stores. The home grown ones are not investing in areas where it would benefit the whole country. They are investing in areas where there are more profits. So the policy constraints listed above would help.
Why can't govt. have same conditions for home grown supermarkets ? ...and you think foreign players will be here for charity?

Last edited by rohitbagai : 30th November 2011 at 04:53.
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Old 30th November 2011, 05:04   #54
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Default Re: Foreign Direct Investment in the retail sector. Good or bad?

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Originally Posted by rohitbagai View Post
Why can't govt. have same conditions for home grown supermarkets ? ...and you think foreign players will be here for charity?
read your first sentence again and see if you are making a case for or against FDI.

about charity, no. Are you expecting charity?
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Old 30th November 2011, 05:27   #55
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Default Re: Foreign Direct Investment in the retail sector. Good or bad?

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Why can't govt. have same conditions for home grown supermarkets ? ...and you think foreign players will be here for charity?
Because conditions needs to be in place before the business starts. If we lay the conditions down now retailers would say they would need x years to implement it.

The second problem with this is its an capital intensive operation, and local retailers might say they don't have so much capital and might have to close shop if these conditions need to be met, and so it would be unfair to put in conditions now and make them close shop because they cannot meet those conditions. If at all conditions like these need to be put its better to put them at the start so as players who think they can meet them get in. Later it might mean confusion, job loss (because of govt policy, imagine the impact on the people), and hence not desirable.

This is the strategy of the big players to invest in back end infrastructure more to control goods movement and pricing from start to finish. So when they come in they would want to build similar infrastructure here as well. The policy conditions only forces them to do so.

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Old 30th November 2011, 08:15   #56
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Default Re: Foreign Direct Investment in the retail sector. Good or bad?

If the FDI is going to help farmers by cutting out the middle man, I think it can happen only at certain places. They cant cover the entire state, its not going to be a benefit for everyone. They can only cover maybe the Bangalore, Tumkur, Mandya, Mysore districts. Where is their network for the rest of the state?
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Old 30th November 2011, 08:32   #57
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Originally Posted by rohitbagai

Why can't govt. have same conditions for home grown supermarkets ? ...and you think foreign players will be here for charity?
In fact the conditions are completely unnecessary. If large format stores which pay market rents, full taxes and minimum wages to workers are to compete with the local kirana store which is typically rent controlled, uses (or abuses) child labor and makes its margins by evading taxes, it has to improve its supply chain efficiency. However, this takes years to develop sufficient scale, and given where capital markets are, all Indian large format retailers would go bankrupt before they can break even. FDI brings long term capital in, which may be happy to wait for returns (sometimes unsuccessfully, look at Coke, Pepsi or Kellogg's.).
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Old 30th November 2011, 08:54   #58
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Default Re: Foreign Direct Investment in the retail sector. Good or bad?

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What are you talking about? Do you think farmers take their tractors and go door to door or shop to shop.
They go to Mandis.
First few days, they sit there, and refuse to sell grain at below Minimum Support price. The govt procurement agencies often do not have space for grain, so whenever there is a bumper crop they can pick up only part of it.
So farmers wait and wait, and grain rots. Then they sell it below MSP to middlemen.

Big Bazaar etc., do buy a lot of stuff directly from mandis. Thats why they sell their Atta cheaper than many other brands, and still make a killing in profit.
After more competition comes in, they will have to drop prices further.
You are missing the point. what I meant was that the bargaining power of Indian farmer is poor due to the fragmented land ownership. These Mandis themselves are the breeding ground for all the price mismanagement. Mostly these are controlled by politicians. So if Walmart and others can break this nexus, well and good. But are they going to take so much pain where they have an option of cheap import.
Still i did not get my answer; why most of the primary items like vegetables are costlier in big chains like Big Bazaar and Reliance fresh compared to Vegetable mandis? Why are they not buying the produce supposedly rotting there?
Govt policies are the key to market pricing in India. Due to high MSP of sugarcane and price control of sugar, most of sugar mills in Inida are facing trouble now.

Last edited by poloman : 30th November 2011 at 08:59.
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Old 30th November 2011, 09:42   #59
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Default Re: Foreign Direct Investment in the retail sector. Good or bad?

The evil middleman is not going to disappear just because the foreign retail giants enter the market. The consolidation of purchasing power in the hands of a few means that the farmer and the consumer will eventually lose out. The initial cut price tactics will be used to wipe out the competition, once that monopoly is established, further policy changes will enable sourcing from anywhere and the fragmented land holding in India will mean that large scale production will be next to impossible. The new middlemen will be the corporates, most people are taken in by the media blitz about the wonderful benefits of organized retail. A store like Big Bazaar is hardly a wonderful experience, its hot, crowded and the stuff available is tacky. Spar is a good attempt, but the checkout lines are always a hassle. Some of the big chains are hardly knowledgeable about local tastes, Reliance stores in Kerala are a good example, they started off without stocking any meat products - in a state where 80% of the population is non-veg.
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Old 30th November 2011, 12:08   #60
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Default Re: Foreign Direct Investment in the retail sector. Good or bad?

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The evil middleman is not going to disappear just because the foreign retail giants enter the market. The consolidation of purchasing power in the hands of a few means that the farmer and the consumer will eventually lose out. The initial cut price tactics will be used to wipe out the competition, once that monopoly is established, further policy changes will enable sourcing from anywhere and the fragmented land holding in India will mean that large scale production will be next to impossible. The new middlemen will be the corporates, most people are taken in by the media blitz about the wonderful benefits of organized retail. A store like Big Bazaar is hardly a wonderful experience, its hot, crowded and the stuff available is tacky. Spar is a good attempt, but the checkout lines are always a hassle. Some of the big chains are hardly knowledgeable about local tastes, Reliance stores in Kerala are a good example, they started off without stocking any meat products - in a state where 80% of the population is non-veg.
I like your arguments. I actually think amongst the supermarkets only Spar and Hypercity (best in India I think, at least what I have seen!) provide any good buying experience. Big bazar is really crowded and full of substandard products, Reliance fresh is as far from fresh as pluto from sun, More is also too crowded and others are either too small (so not much variety available) or too expansive (like M.K. Retail here in Bangalore though the products there like fruits and vegetables are good).

If you ask me I support entry of foreign players for one reason only. I hardly think the small kirana stores have anything more to worry as supermarkets are already here in India, even in small cities. Their presence can mean local players like Big Bazar and Reliance Fresh improve themselves. Whether it will actually happen nobody knows as it is a conjecture at the moment.

I think right now it must be the likes of Reliance Fresh and Big Bazar who must be the most worried and not the small kirana stores with this move for FDI in retail.
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