There will be no level playing field'

Print edition : December 30, 2011

T. Vellaiyan, president of the Tamil Nadu Federation of Traders' Associations. - M. VEDHAN

T. VELLAIYAN, president of the Tamil Nadu Federation of Traders' Associations, discussed a wide range of issues relating to the entry of foreign direct investment (FDI) into the retail sector in the country in an interview he gave Frontline. Excerpts:

What is the first and foremost reason to oppose FDI in the retail sector?

Retail trade is the backbone of the country's economy and allowing FDI in this sector will result in monopolisation of the market by multinational corporations. Creation of monopolies in any sector will go against the people's interest. It may be recalled that with a view to preventing concentration of economic power [in the hands of a few] and protecting consumer interest, the Government of India introduced the Monopolies and Restrictive Trade Practices Act, 1969. The entry of monopolies into the Indian market will result in MNC-run corporates purchasing agricultural produce and products at rock bottom prices and selling them to consumers at high rates. The move will not benefit the common man in any way. In fact, opening the retail market to FDI will expose vulnerable consumers to shoddy treatment. The MNCs, which will swamp the market, will initially offer goods at a competitive price with a view to gaining a foothold in the growing market. However, once they establish themselves in a commanding position by wiping out their immediate competition, they will hike the retail prices. They will not even bother to maintain the quality of the goods. A case in point is the retail prices quoted by foreign soft-drink companies when they made a foray into the country. They raised the cost steeply after decimating indigenous manufacturers and spreading their network to every nook and cranny. Huge investments and advertising blitzkrieg seems to be their business motto.

Unfortunately, the government's policies and strategies to enhance revenue through sales tax will only help these retail giants. With major manufacturing units reaching a tacit understanding with the MNCs for the supply of goods at concessional rates, there will be no level playing field for a healthy competition between the traditional retailers and the supermarkets.

It has been argued that elimination of the role of intermediaries will help farmers get higher rates for their produce.

Such tall claims have not been substantiated. In fact, promising high prices to farmers amounts to leading them to an illusory world. Once these supermarkets establish their monopoly, they will start calling the shots and coercing the farming community to sell its produce at the rates fixed by them. They will not hesitate to force the farmers to switch to contract farming and change the cropping pattern to suit their requirements. Our farmers have already been put to hardship owing to the high cost of seeds fixed by companies such as Monsanto.

Will the entry of retail giants lead to a fall in prices and an increase in employment?

It is a universal fact that smaller retail shops, particularly the owner-manned general stores in different parts of the country, sell articles at rates lower than the prices quoted by the big retail outlets, as they avoid heavy overhead expenses. In many places, the self-employed retailers transport goods themselves in tricycles or bicycles. But in the case of big players like Walmart, this will not be the case as intermediaries will assume a new avatar in the form of purchase officers, transport personnel and supervisors.

In our estimate, organised trade accounts for 4 per cent of the retail sector, and it has so far registered an annual growth of 25 per cent. But allowing it to take a quantum leap will result in displacement of several lakh people.

Unable to withstand the onslaught of corporate houses in the retail sector, several self-employed traders have wound up their businesses. While some of these displaced traders have become small-time real estate investors or financiers, others have taken up sundry jobs. We, in Tamil Nadu, have another reason to oppose the Centre's move. The State has 25 lakh retail shops, and around two crore persons, including owners and employees, depend on the retail sector.

Do you think the condition that 50 per cent of the investment should be made in back-end infrastructure would enhance efficiency and help modernise the supply chain?

The protagonists of FDI in retail assert so. But this can be achieved through the existing indigenous retailers instead of promoting FDI-driven supermarkets. Efforts must be made to help traders update their knowledge periodically by disseminating necessary information in this regard.

How do you respond to the claim that the entry of retail majors will offer a range of choices to consumers?

The purpose of retail trade should be to meet the needs and demands of the people. It should not lure them into obsessive consumerism by exhibiting in their showrooms all the articles dumped in the retail market. This will dissuade consumers from saving and land them in perpetual debt. Traditional retailers would not resort to such negative strategies.

Is it not true that curbing the role of intermediaries in the retail market will help bring down prices?

Price inflation spirals haunt the nation not because of middlemen in the traditional retail market but because of speculative trading online. The government should take immediate steps to ban online trading. Our flawed exim policy is another major reason for the rise in the prices of essential articles.

Had the government followed the Gandhian principle of freeing people from economic dependence on external markets by adopting a well-thought-out import and export strategy giving top priority to fulfilling the requirements of the local people, prices could have been kept under check.

If the sudden spurt in the retail prices of onion in 2010 was attributed to the government's wrong export policy, the crisis faced by the oil manufacturing units in recent years was triggered by the flawed import policy. I can give you a typical example.

We have been importing palm oil and soyabean oil for edible purposes. This has proved detrimental to the oil manufacturing units. Until recently Vellore, Tiruvannamalai, Cuddalore and Villupuram districts had several stone oil presses. The traditional oil mills have closed down. In Pudukottai district, oil mill premises have been converted into marriage halls.

S. Dorairaj

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