Organised retail fails to blunt inflation”, January 7, is an eye opener since it is generally believed that the advent of organised retail will immediately help lower prices. This, your story says, has not really happened. The reason for this, however, is not because organised retail is making very large margins, it is because it is not allowed to function efficiently. In most cases, retailers are not allowed to procure directly from farmers but have to buy their produce from the mandis since state governments are worried about losing their share of tax collections. It is also true that creating supply chains takes years and it is unrealistic to expect firms to be able to create these in such a short time.
Besides, it is not possible for one firm to create supply chains in each item — you can do it for potatoes and tomatoes, but you may not be able to do it for cabbage. To create supply chains across major product lines requires a series of third party intermediaries — say transporters who specialise in refrigerated trucks. These intermediaries, however, will come in only when organised retail is big enough to justify their presence. By carrying such comparisons on pricing, you are giving the impression organised retail is not working. That is not correct.
Shiv Gupta, Gurgaon
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