We cannot risk overseas entities gaining any sort of control or even influence over the nation's food supply chain that could impinge on our national security.
Recent news reports say that the Committee of Secretaries has recommended 51 per cent Foreign Direct Investment in multi-brand Retail in the country. The matter awaits Cabinet approval. The die appears to be cast.
Let us call this as it is. The government is about to open up the food supply chain of the Indian population at large to foreign retailers. This bears repeating – the food supply chain of the country is to pass on to foreign companies. National security considerations are not part of the discourse. Where is national security coming into this?
Before I provide a historical perspective, let me share some information on what is happening in Brazil right now. The country opened its doors to big foreign retailers in the 1990s. Fifteen years later, four weeks ago, a corporate deal was announced to merge Pao de Acucar, Brazil's biggest supermarket chain, with Carrefour's (French) Brazilian operation. The deal would have created a combined entity that would have 27 per cent share of the Brazilian national retail market, and 69 per cent share in the Sao Paulo state.
This means that a vast number of small retailers have been taken out in just 15 years. The deal has not closed at the time of this writing. The Economist dated July 9, 2011 said this about the deal: “The outcome … could hinge on any number of strategic, legal or political factors. Consumer welfare, however, will not be among them.” The Brazilian government is but a bystander to these corporate games affecting the people.
The simple lesson from these examples — foreign retailers will consolidate their position in our country over time.
This situation takes me back to the times when the British exercised control over the supply of salt to the Indian consumer, for 187 years. The first rules imposing Salt Tax were made by the British East India Company, as early as 1759. Since then, at different points in time, the Company first and the British government after 1857, played with the amount of salt tax levied, to suit their strategic imperatives. On several occasions, the tax on Indian salt was raised to enable the import and sale of English salt in the country. In order to harmonise regulations over the supply of salt, the British passed the India Salt Act of 1882. This created a government monopoly on the manufacture and sale of salt. Salt could be manufactured and handled only at official government salt depots, with a tax of one rupee four annas on each maund (82 pounds).
People are familiar with Gandhiji's Dandi march in 1930. The Salt Tax was not repealed by the British even after this extraordinary effort.
The tax was finally abolished only in October 1946 by the Interim Government of India. The Salt Tax was one of the most pernicious, longest lasting sources of revenue that supported the British in India. The British had their hands in every Indian's pocket, and it took forever to remedy this. The simple lesson here is that we cannot risk overseas entities gaining any sort of control or even influence over the nation's food supply chain.
The US examples
Turning to the issue of national security, there are two examples from the US, the country that pushes for opening of markets, that will help us learn about this.
In 2005, China National Offshore Oil Corporation (CNOOC), a company 70 per cent owned by the Chinese government, made an $18.5-billion bid to acquire UNOCAL, a second-tier US oil company. This was deemed as a move by China to get into US energy infrastructure. US lawmakers raised national security concerns and demanded a review. China was forced to withdraw the bid.
In 2006, the stockholders of the Peninsular and Oriental Steam Navigation Company (P&O), a British firm, agreed to a sale of that company to Dubai Ports World. As part of the sale, Dubai Ports would have assumed the leases of P&O to manage major US port facilities in New York, New Jersey, Philadelphia, Baltimore, New Orleans, and Miami. There was uproar when the deal became public. The US House Panel voted 62–2 to block the deal. They deemed it against national security.
The US has stopped oil companies and port facilities from passing into foreign hands on grounds of national security. Here in India, the authorities recommend opening our food supply chain to overseas interests.
Security concerns
We can raise this issue in a Western context. Two leading food retailers in the West are Safeway (US) and Carrefour (France). Safeway's company value is $7.3 billion (Rs 33,000 crore) and Carrefour's $21.5 billion (Rs 96,000 crore). These values are within reach of Indian business groups (Tata bought Corus for $7.6 billion; Mr Mittal acquired Arcelor for $38 billion).
If there was a bid by a foreign company for these companies that serve millions of American and French families, wouldn't US and French law makers cite national security considerations? And they will be right in protecting their national security.
Brazil teaches us that foreign retailers will in time take over a vast swathe of our country's food supply chain, with the government as spectator. The Salt Tax experience teaches us that our people will pay a heavy price if control of food essentials passes over to foreign companies. The US teaches us that we should always put national security considerations ahead of anything else.
India's food supply chain (which is what retailing represents) is a matter of national security. It is not about opening up markets. Please, can we see it for what it is?
(The author is Group CEO, R K SWAMY HANSA, and Visiting Faculty, Northwestern University, US.)
Comments:
Is Mr.Swamy suggesting that East India Company is coming back in the form of foreign retailers. Are we so fragile or is our country a banana republic so that a foreign retailer can take over the country in a couple of years. The writer should not create an end-of-the-world scenario about FDI in retail. National security can be affected by opening up any sector, say finance, manufacturing, tele-communications and so on. Should we become a closed economy of 60s, 70s , or should we open up and benefit from foreign capital, technology etc. We should have confidence in ourselves. No doubt, we should learn from others' experiences and take necessary safe guards so that we get best out of the given situation. At the same time, comparing taking control of port facilities and 51% FDI in retail is not appropriate.
A wonderful article, which outlines with examples, how by opening up our retail and the food chain to MNCs , our National Security is at risk. We will be slowly slipping back into slavery just as we did before our Independence, but this time not because of military might but because of Economic might of the "attackers" from across the border, fully supported by the corrupt and 'anti-national' Government we are having at the moment. Nationalist groups like the Swadeshi Jagran Manch and parties like the BJP have been opposing this move; but their movements is not given the same coverage by the partisan media we have in India today. It is for us public, supported by the small retailers associations, to fight out this anti-national bill.
(1) The overarching point being made is that we have a local, homegrown, large and fragmented retail supply side eco system that currently operates in our country. This model that has evolved on a ground-up basis is the appropriate mechanism that balances the socio-economic dimensions of this operation in the most self-sustaining manner. Induction of 51% fdi in multi brand retail will erode the efficacy of this structure without providing any lasting value in return.
(2) Countries like germany, korea and japan provide examples of how private sector enterprise and goverment collaborate to take forward national agendas in the global marketplace. They reflect a pragmatism that we ought to embrace instead of claiming that our national self confidence must be demonstrated in the form of thoughtlessly exposing ournation to a disruptive fdi engagement in the garb of progress.
Supply Chain?
Just because a Wal-Mart or a Carrefour has a supply chain does not mean, they can
take over a country's food supply chain. The Indian Government has strict controls
over the movement of food grains in the country. Wanna export or import, kneel
before the mighty red tape. I'll bet those rules will apply to the retailers as well. I
mean us growers are not allowed to sell our produce by ourselves to another state.
Price Gouging?
Safeway, Walmart and Carrefour built their businesses on the low margin, high
volume principle.
Brazil should teach us to be more careful. The people of India should be arguing
for better anti trust laws, not a walled nation.
Physical frontiers need not be breached any more as Sri Nair imagines,the world today has done away with that model. all we need
is the mindscape of our neo moderates who can but will not see any threat explicit or otherwise. the article highlights not an elehant in a room but a monster cuddling in oyur bed ...wake up before all is lost
Its just not a question of opening up retail or other aspects of economy, there is a larger picture, this article raises many questions. We all know how our politicians behave, the point - is it wrong to protect the interest of the country's poor? And there are a lot of them. It is prudent to weigh the pros and cons before agreeing to opening up economy in food and other core industries. What has been cited gives insights into proctetionist behaviour of west. More than 75% of Americas forests are still present & wood is imported. Oil reserves are not used but imported. There are so many examples. Why not ask the west to invest & build? why do they want to buy? Lets get over our colonial mentality, whatever the white says may not be correct.
Economic subjugation is the new weapon, not guns!
The well worded article written by Mr. Swamy is an eye opener. Let me remind that the Food Safety & Standards Act has been enforced in the Country from today.No one can dispute that adulteration is a crime and must be dealt with strictly. However, the conditions stipulated in the Act are such which can not be complied by Indian people in the prevailing circumstances.Therefore, the article written by Mr. Swamy stands true to the fact that only the global food giants will be able to comply with the new law and they will be at ease to sell their products. The traditional Indian food will be a past history very shortly. Food is the one sector, same principle will be applied in other sectors as well. Are we not allowing MNCs to have a monopolistic bazar in India.
I agree with Shekhar. His point is crisp. BUT Our politicians have lacked conviction in correcting systemic problems. They see FDI in retail as way to save face. They see Self-reliance as having no meaning when western companies are tapping on Indian doors and are ready to finance political expenses. They see it as a good way to avoid issues. I dont think Shekhar's point of view will be heard. I am sure FDI in retail will happen. Whether it is good for us or not. Many Shekhar's will have to come togther to dissuade the government. America and its president is losing to China and its threats. So they see only the bull-dozing of BRIC nations as their only way out. India still has a chance and we must hold out .... !!!
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