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FDI rules in food retail may be changed to allow sale of some FMCG products

After approving 100% foreign direct investment (FDI) in food processing, the Centre is preparing to further relax rules to allow foreign retailers and e-commerce companies to sell consumer products made in India.

business Updated: May 16, 2017 00:23 IST
Raj Kumar Ray and DK Singh
Raj Kumar Ray and DK Singh
Hindustan Times, New Delhi
FDI,Harsimrat Kaur Badal,Food products
Harsimrat Kaur Badal at Parliament during the Budget session in New Delhi.(Mohd Zakir/HT Photo)

Consumers might soon get home care products such as shampoo and soaps at foreign retail stores.

After approving 100% foreign direct investment (FDI) in food processing, the Centre is preparing to further relax rules to allow foreign retailers and e-commerce companies to sell consumer products made in India.

Union minister of food processing industries Harsimrat Kaur Badal told Hindustan Times in an interview that she expects the change in the FDI rules to attract more funds into the country, encourage the ‘Make in India’ initiative and increase farmers’ income.

Global retailers, including Amazon, Wal-Mart and Metro AG, are keen to increase their footprint in India to cash in on the consumption growth story of the world’s second populous nation.

Last year, India allowed 100% FDI both in food processing and trading, including through e-commerce, for products manufactured in India.

However, retailers complain of wafer-thin margins in selling just fruits and vegetables.

Global food retailers also sell some consumer goods to cover the loss on food items — a model called “Food Plus”.

“The viability comes from other products,” Badal said, referring to the sale of soaps, shampoos and other consumer goods along with farm products.

“I have written to the Prime Minister (for relaxing the FDI rules). Today our farmers need infrastructure at the farm gate level, which is missing,” she said.

The Union minister said that in the current set up, the farmers were selling their produce at a low price.

“When his produce comes, a farmer has to sell at whatever price he gets. After some months, the same product is sold four times the cost. Farmers are now selling their produce at a very low price. We need infrastructure as fast as possible at the farm gate level.”

“So why not put a clause (in FDI rules) that whoever invests at the farm gate level, 20-25% of that amount can be invested in selling soaps, shampoo and other FMCG (fast moving consumer goods). Many retailers will be interested to expand their operations. What I am saying is videshi paiso se swadeshi kisano ka bhala,” she said.

Higher FDI will improve the $22-billion food processing sector as there is a dearth of infrastructure and high scale wastage.

While India is a leading producer of vegetables, fruits and milk, Badal said a survey of 26 commodities in 150 districts show wastage up to 15%.

The minister also pointed out the food processing industry was handicapped by decades-old rules of the Food Safety and Standards Authority of India (FSSAI). States have to implement the new rules and end inspector raj, she added.

Without mentioning the ban on Nestle’s Maggi, Badal said the food processing industry was hurt by the delay in product clearance for items with minor variance.

While big companies got caught in the web of regulation, the unregulated sectors could churn up unhealthy products and grab a bigger share of the market, she said.

As against tests for just 375 product ingredients approved earlier, she said the rules have been streamlined to global standards and 1,200 products can be tested now. “With that, the investment flow has also smoothened,” she added.

The minister said the government was also coming up with a state-of-the-art testing facility at Sonepat which will be the final authority for food safety.

In order to arrest post-harvest losses of horticulture and non-horticulture produce, the ministry has accorded approval to 42 Mega Food Parks and 236 Integrated Cold Chains for creation of modern infrastructure for food processing along the value chain from the farm to the market. Out of 42 Mega Food Parks, eight are operational. Of these, six Mega Food Parks have been made operational during the past three years.

Another four Mega Food Parks are targeted to be made operational in next three months. Similarly, out of 236 Cold Chains, 101 Cold Chains have been sanctioned recently in March, 2017. Hundred Cold Chains have become operational, with 63 of them being made operational during the last three years.

First Published: May 15, 2017 23:20 IST