The Indian rural market size which includes FMCG, Agri inputs and farm machinery is

estimated to be about 1,25,000 crores (source : Fertilizer News), 50% of which

is contributed by agri inputs. It is expected to increase to two lakh crores in 2005-2007.
the vast
untapped potential of the rural market and slowly
increasing purchasing power of the rural population.
‘Tata’ and ‘Mahindra & Mahindra’ have ventured into
a similar proposition with hub and spoke model. The
Tata Kisan Vikas Kendras by ‘Tata’ (Mahindra Krishi
Vihar in case of Mahindra & Mahindra’s), act as a hub
or resource center connected with the various Tata Kisan
Kendras (TKKs) under them as spokes.
Services offered
agro input supplies,
farmequipment leasing,
agronomy services,
information,
training
and
other services like-crop insurance, buy-back
facility, credit facility etc.

ITC through its unique web based portal known as echoupal

is carrying out activities like – dissemination
of Information (about scientific farm practices & risk
management, weather forecast, prevailing market price
in local and global market etc.), facilitating the sale of
farm inputs (now with embedded knowledge) and
purchase farm produce from the farmer’s doorstep, thus
facilitating decision making by farmers based on the
latest information.

Issues and challenges facing agri-retailing :

Indian Agri business sector has the potential to transform
India into the leading agri economy of the world. But
there are certain initial challenges that the sector has to
win over such as
✦ Lack of supply chain integration
✦ Sidelining arhathias (middlemen) from the valuechain
✦ Difficulty in credit recovery and reluctance of farmer
in approaching banks
✦ Low penetration of ‘one stop-shops’ (due to huge
capital requirement)
✦ Efficient buy-back system (purchase of farm output)
✦ Efficient compensation delivery system in case of
product failure
Opportunities ahead :
At the same time the retailing in Agri business sector
has many opportunities via.
✦ Government’s impetus to private extension services
✦ ‘One stop – shops’ can act as facilitators of micro
finance
✦ New channel evolved can be used by FMCG and
consumer durables
✦ Can act as accreditation agency for certifying
farmer’s produce
✦ Customer database can serve as a source of genuine
and readily available information.

with 700 million people seeking employment in agriculture sector, and its slow
growth, the only way out will be to ensure increase in productivity per acre and
increase in productivity per man—

Major players in the North

The following companies are engaged in contract farming and source their
produce from these farmers, after advising them on the best farm practices,
seeds and fertilisers.

Godrej Agrovet already has 33 Aadhar stores across the country, which it plans to
increase to 45 very soon. The company started its fruits, vegetables, dairy and
poultry retail business through their Nature’s Basket stores. While seven Nature’s
Basket stores are already functioning in Mumbai, the group plans to add another
eight in Mumbai itself, before its sets base in Delhi, Gurgaon, Hyderabad, Chennai,
Chandigarh, Amritsar and Ludhiana, says R S Vijan, Executive Vice President, Godrej
Agrovet.

Subhiksha, the discount retail major, plans to open 104 retail outlets in Punjab and
Haryana. Subhiksha, which has four channels— fruits and vegetables,
pharmaceuticals, FMCG and telecom stores — to market its goods proposes to have
all four categories of stores in the region. A sum of Rs 50 crore has been earmarked
for the expansion of these stores in the first phase. R Subramanian, Managing
Director of Subhiksha, says they have over 450 stores spread across Delhi, Andhra
Pradesh, Karnataka, Gujarat, Maharashtra and Tamil Nadu, and have made an outlay
of Rs 500 crore for expansion so as to have 1,000 stores and a pan-India presence
by the end of 2007.

Reliance Fresh has already earmarked Rs 27,000 crore for its retail business. The
company currently has 71 stores under the brand name Reliance Fresh. In Punjab,
the company plans to open 32 Reliance Fresh stores, while in Haryana, they propose
to set shop in Ambala, Yamunanagar, Karnal, Panipat and Kurukshetra.

ITC Choupal, the first agri-retail venture to open shop in City Beautiful, has become
quite popular. At present, ITC has three stores at Chandigarh, Hyderabad and Pune.
Its outlet in Chandigarh, with over 150 footfalls a day.

Bharti Retail plans to invest $ 2-2.5 billion by 2015 in its pan-India operations. It is
looking at approximately 10 million square feet of retail experience across all cities in
India, with a population of over one million. It plans to employ 60,000 people. The
company will launch its retail outlets in multiple consumer friendly formats, including
hypermarkets and supermarkets. They will serve all regular shopping requirements
of an Indian household—fruits, veggies, meat and poultry, dairy products, staples,
processed foods besides other FMCG and consumer durables.

Adani Agri Fresh launched operations in Himachal Pradesh last year, when it
procured a major chunk of apples from the hill state. The orchardists in the largest
apple growing state in the country got a much better price from the agri-major and
they were also spared the hassle of packaging their produce and transporting it to
big markets in Delhi, Mumbai, Ahmedabad and Kolkata. They have already made an
investment of Rs 110 crore in the hill state for setting up controlled atmosphere
packaging and storage units. This year, the company plans to invest Rs 160 crore to
set up its own cold chain of refrigerated vehicles for transporting apples, kiwi,
almonds and peaches.

Boom in retail

With the retail mart business in the country now pegged at $ 12 billion (accounting
for just three per cent of the total market), it has tremendous growth potential in the
fast-expanding Indian economy. Organised retail in the Rs 1,45,000 crore fruit and
vegetable business, is estimated at about Rs 300 crore. In the last three months,
over 60 outlets have opened across the country. Fresh food accounts for 50 per cent
of the food and grocery bills in India, as compared to 15 per cent in the USA. No
wonder that 4 lakh square feet of retail space has been dedicated to fresh food
retailing in the country. And this is just the beginning`85

King consumer

As Rajan Bharti Mittal, Joint Managing

Director, Bharti Enterprises, says, "The boom
in this sector will not only benefit millions of
consumers, but also farmers, small
manufacturers and artisans. This sector will
also offer enormous direct and indirect
employment opportunities while attracting
huge investments in building the supply-
chain infrastructure, adding to economic
growth of India, especially in the rural
areas". Bharti, along with Walmart, will be
investing Rs 11,000 crore to set up retail
stores across the country, by 2011.

The largely agrarian economy of India has been in the doldrums, with the production
per acre having reached a plateau and the area under agriculture declining rapidly.
With a staggering growth rate in agriculture (2.3 per cent) and high rural
indebtedness, the boom in agri-retail is expected to fuel growth in the agriculture
sector, besides improving the financial condition of farmers. Punjab has gained
infamy for having the third largest extent of rural indebtedness in the country, after
Andhra Pradesh and Tamil Nadu, with the highest magnitude of indebtedness in rural
households in the country (with per capita debt of Rs 41, 576). In Haryana, too, over
53 per cent farmer households in are under debt, with an average outstanding per
capita debt of Rs 26,007.

Seeing the boom for apple growers in Himachal Pradesh and mango growers in
Ratnagiri, Maharashtra, after their produce was picked up by corporates last year,
NABARD, too, is recommending that farmers gear up and form producer groups so
that they can tie up with agri-retail majors for selling their produce. Krishan Kalra,
Secretary General of PHD Chamber of Commerce and Industry, says that with 700
million people seeking employment in agriculture sector, and its slow growth, the
only way out will be to ensure increase in productivity per acre and increase in
productivity per man—which could be helped with the financial and technological
assistance of the corporates entering into agri-retail.

Win-win situation

With retailing in India set to touch Rs 1. 1

lakh crore by 2010, (provided it gets an
investment of Rs 20,000 crore), it would be
a win-win situation for farmers. A study
conducted by Confederation of Indian
Industry (CII) says

development of organised retailing will lead

to increased efficiency in the agriculture
sector and remove intermediaries in the food
supply chain. With investments in upgrading
technology and agricultural practices in the
entire value chain, including production, packaging, grading, storage and logistics,
the current levels of wastage, ranging between 24 per cent to 40 per cent, are
expected to come down drastically.

Impact on market

Though the blitzkrieg on organised retailing having caught the fancy of the
economists and policy markers in the country, not a single independent study has
been conducted to examine the impact of organised retail on the 12 million small
shopkeeper, 40 million hawkers and 200 million small farmers.

While the government functionaries and industry leaders dismiss all fears of this
leading to unemployment, experiences from countries like USA and UK, where
organised retail occupies 70 – 90 per cent of the total retail business, suggests that
they have a direct influence on the small and unorganised players in the market. A
recent study conducted in the USA, measured the impact of Wal-Mart’s retail boom
on prevailing poverty. Even when the poverty rates were down across USA, states
were the retail major had set up its operations had led to displacement of workers
from small shops; and, destruction of local entrepreneurship.

As organised retail becomes a reality in India, a section of economists fear that

unfettered FDI in retail could further compound existing poverty. With FDI in
agriculture sector being allowed without first dealing with the agrarian crisis in the
country, many fear that the objective is to transfer the unwanted and risky
 technology of genetic engineering on plants and animals in India. "We must ensure
that agriculture is not sacrificed at the cost of industry," says Rajesh Krishnan,
Campaigner for Greenpeace.

However, industry rubbishes these fears and says that a boom in agri-retail is the
only way to revive a slackening growth in agriculture sector. A study by the
Confederation of Indian Industry (CII) and Pricewaterhouse Coopers (PwC) suggests
that the development of organised retail will generate an additional eight million
jobs, directly and indirectly. The study, The Rising Elephant: Benefits of Modern
Trade to Indian Economy, suggests that by year 2020, India will lead in the retail
sector.

Allaying fears of FDI in retail creating unemployment by wiping out the kiryana
stores, the study said that only those working in one lakh mid- category stores were
likely to be displaced in the mid-term, as against the workforce employed in 12
million retail outlets across the country. In the long run, the metamorphosis in this
sector would lead to the redeployment of this workforce also.