Can Organised-Retail Sector Control Inflation?

All these days, I had been writing about how the organized retail enterprises, particularly the one of bigger business houses such as Reliance and Bharati or MNCs such as Wal-Mart will improve the things for the both- the producers as well as the consumers. As indicated in the mission statements of the Reliance Retails and others, farmers were to get the fairest price and other technical and financial support for farming inputs from the retail enterprises, and the consumers were to get the commodities at the lowest prices with the many intermediaries in the system getting eliminated. If the mission truly gets translated in real business model, the inflation can be in check. However, in the present system, the traders and the other intermediaries (and their godfathers who may be politicians or mafia dons) are getting all the benefits. With continuously increasing prices of all the essential commodities of daily use, the majority of the consumers are stressed. The producers of the commodities don’t get any share of the extra price charged from the consumers.

If the big retailers buy vegetables and fruits and other agricultural produces from the farmers, they can contain the prices too unless they become too greedy to get the maximum from the consumer to fatten the bottom line. If they pay the farmers the best price, the majority of the ‘aam aadmi’ in rural India could think of a good living. However, I don’t know if it is happening. ITC buys its wheat straight from the farmers through its Choupal network. I don’t know how much they pay to the farmers. But I don’t find the ITC’s ‘Aashribaad’ atta any cheaper than other brands.

Media is talking of the spiraling prices of the essential commodities. Politicians are concerned and so is the government as the ruling party has already lost two states where it was in power. It is to face election in some more states soon.

Normally, the government cuts import duties to facilitate supply improvement at cheaper price, and bans exports to improve the supply. The government has done that. It also has slashed fuel prices this time as it is considered as the major reason of high transportation cost. And yet the price of almost every commodity has risen.

Naturally, it becomes difficult for a democratically run government to contain inflation if the trading community and the organized producers become unscrupulous. Unfortunately, many a times, one gets that perception in this country.

How can the price of onion go on increasing in Delhi (around Rs 20 per kilo) where most of the people can’t have satisfaction of a good meal without onion, when the farmers producing the onion in Nasik are hardly paid a remunerative price (as low as Rs 2 per kilo)? Can the transpiration and the margin for business cost so high to account for the difference? Every now and then, I find the rates of Azadpur mandi of New Delhi published in media. However, as consumer, I find the retail price of each of the vegetables from local vendors at least three times more that that of the mandi. Why is it so? Is it not because of the cartel of the petty traders?

And the reality of the price rises for some of the essential items, as reported, are: “the price of moong dal have shot up 118 per cent from Rs 22.50 to Rs 49 and those of urad are up 82 per cent. Wheat is up 33 per cent while atta is up 44 per cent. The onion prices shot up 186 per cent. In urban homes, the expenditure on just food and groceries has gone up by as much as 25 to 40 per cent.”

If I go by what Reliance Retails and Shubhiksha promised, the prices could have been in check without causing such a worrying situation. Nothing has happened in last one year to cause the steep price rise of the commodities mentioned above.
Read ‘Runaway inflation’

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