As part of an overall strategy of improving food management to reduce inflationary pressure, the food ministry has written to Prime Minister Manmohan Singh to incentivise organised retail trade in the farm sector.
This, however, is related to Indian retail companies and doesn’t speak directly about the contentious issue of Foreign Direct Investment (FDI) in retail trade. The food ministry has also backed integration of the spot market with the futures market. Acting on the report of the Working Group on Consumer Affairs headed by Gujarat Chief Minister Narendra Modi, Food and Consumer Affairs Minister K V Thomas, has written, “Organised retail should be incentivised to make direct purchase from farmers”.
Thomas has also asked for safeguards to check hoarding and artificial price escalation. He has recommended that traders and stock holders “obtain trading/dealers licences under Essential Commodities Act (ECA) wherever required and do their purchase transactions in a transparent manner”.
The Modi committee has advocated promotion of retailing by the organised sector on the ground that it would establish direct links between producers and consumers. It also says the organised retail sector has the potential, because of its scale of operations and access to financial resources, to minimise the marketing channel between producers and consumers.
The action plan of the food ministry, sent to the prime minister, also says, “The ECA should be amended to put non-perishable essential commodities under a licencing/registration order. There should be a centralised authority for issuing registration like VT registration. All dealers/traders need to seek licences for turnover in excess of the prescribed quantity”.
But it has not asked for any centralised licencing system and says it is best left to the states, as the enforcement machinery is in the states. The states, according to Thomas, should be free to prescribe the turnover of different commodities beyond which the licencing/registration can be made compulsory.
Presently, there are no regulations on domestic retail except those relating to municipal regulations and labour laws.
Among other recommendations, the ministry has recommended establishing a mechanism, if necessary by creating a dedicated agency, to collect and widely disseminate timely information to all stake-holders on production, import, stocks and overall availability of essential commodities. It has also sought establishment of special courts for speedy trial of offences under the ECA.
