Permit FDI in retail to tame food inflation: Ficci

Permit FDI in retail to tame food inflation: Ficci

New Delhi: Pitching for foreign direct investment in multi-brand, industry body Ficci on Sunday said FDI in the segment could help tame food inflation, hovering in the range of 17-18%.

“FDI in retail has to be permitted in order to ensure expansion of organised retailing in the country," the industry body said in a statement.

The present onion crisis “is no doubt a direct consequence of supply side constraints," it said adding food inflation is playing “havoc with the budgets of the common man".

As per the latest government data, while food inflation has softened to 16.91% for the week ended 1 January, 2011, prices of vegetables, onions and protein-based items continued to remain costly.

Ficci, however said the FDI in retail should be permitted with the stipulation that the organised retail chains would work closely with farmers in providing inputs to improve the productivity and directly sourcing from farmers.

“This would result in better prices to farmers as well as consumers and also addressing the structural issues such as low productivity and wastage," Ficci said.

Government has floated a discussion paper, which suggested opening of the multi-brand retail sector for foreign players. Consultation process on the paper is over.

Besides amendment in the FDI policy, Ficci said there is an urgent need to accord a special status to perishables and horticulture commodities and changes in the Agricultural Produce Marketing Regulation Acts of different states and union territories.

“By doing so, it would mean that anyone can buy or sell only perishable commodities anywhere in the country," the chamber said.

The long chain of intermediaries and inefficient price discovery mechanism are the reasons for high price mark-ups between farmers and consumers Ficci added.

It suggested that farmers should be encouraged to form producer associations, cooperatives and aggregate the produce, which could be directly sold on electronic spot exchanges or to retailers.

The chamber also argued that all the markets should be electronically linked for improved efficiency and better price discovery for both the farmers and consumers.