The Hindu Business Line : ‘FDI in retail will be allowed if kirana stores are unaffected’

Mr Subodh Kant Sahai, Minister of State for Food Processing Industries (right), and Mr Rajan Mittal, Joint Managing Director of Bharti Enterprises, at a conference in New Delhi on Monday —

Our Bureau

New Delhi, Dec. 17 India could consider opening up its $330-billion retail market after it is convinced that the kirana stores will not be affected by big retailers, said Mr Subodh Kant Sahai, Minister of State for Food Processing Industries.

“The Department of Industrial Policy and Promotion has engaged an agency to make an in-depth study on the impact of FDI in food retail on the domestic market and the report is expected to be available by 2008,” Mr Sahai said at the two-day conference on ‘Winning intelligent supply chains’, organised by the Federation of Indian Chambers of Commerce and Industry (FICCI), here on Monday.

“Organised retail, backed by an efficient supply chain, has the potential of raising the rate of growth of the food processing sector from 13 per cent to 20 per cent in the next three to five years,” he added.

The Minister said that during the 11th Plan, the Ministry would launch a revamped comprehensive scheme for creating integrated cold chain infrastructure at different levels — farm level primary processing centres-cum-cold chain, collection/aggregation centres and strategic distribution centres. Mr Rajan Mittal, Chairman, FICCI Retail Committee, and Joint Managing Director, Bharti Enterprises Ltd, said that India had the potential to become the export food and fruit basket for the world. “To achieve this, it is imperative to involve the private sector in the PPP model as the investments required are reckoned at Rs 100,000 crore,” he said.

Mr Sahai and Mr Mittal unveiled the FICCI-Ernst & Young (E&Y) report on ‘Winning with Intelligent Supply Chains’ by Mr Pinakiranjan Mishra, Partner, E&Y.

Mr Mishra said: “It is a comprehensive study on supply chain characteristics of major categories in India’s retail sector that makes an assessment of issues and recommends measures to mitigate these concerns in a bid to assist the Government, industry, retailers and investors in identifying action areas to streamline supply chain in order to achieve desired economic benefits.”

Role of railways

Amongst the key highlights of the report are the Railways and its role in the supply chain and logistics. It is estimated to accelerate freight earnings growth by 100 per cent. The report suggests that given India’s large food production and a rising demand for a large and efficient supply chain, there is requirement of an additional warehousing capacity of around 35 million tonnes, worth nearly $1.88 billion by 2012.

According to the report, third party logistic providers have a significant opportunity of growth. With the outsourced logistics market estimated at $10.2 billion, it is expected to grow at a compounded annual growth rate of 15 per cent to 20 per cent during 2007-10, driven by a growing trend towards annual contracts.

The report also identifies food and grocery retailing as a significant and lucrative retail opportunity for organised players, with huge prospects in the milk and dairy product categories, besides the high potential fruit and vegetable categories.

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