SOIL Report 2008 - ACCESS Development Services

The Contribution of Corporate Supply Chains to the Livelihoods of the Poorfarmers being short-changed through improper grading and weighing. Second, the original plan to setup temperature-controlled storage facilities at mandis remains largely unrealised.But the greater problems lie in the policy’s design. The requirements of APMA lead to long and cumbersomesupply chains, inhibiting direct relations and improved responsiveness between consumer andfarmer. The time and cost implications for farmers in reaching and waiting at the mandi for their sale toclear, lead many farmers to sell through traders who bear these costs, while others might camp out forthe night to beat the queues. The requirement of an auction necessitates the presence of a governmentappointedauctioneer to define the sale (i.e. check and grade the produce from a trader). The produceof different farmers may be sold separately following rudimentary quality checks, but measures are toocrude for farmers to see significant reward for quality. Only licensed ‘commission agents’ are permittedto bid on a buyer’s behalf and these agents tend to aggregate their purchase at day’s end before shippingit to the buyer. So any quality distinctions made at point of sale are lost and the link to farmer, erased.Multiple points in the chain further necessitate bagging of goods, which hugely increases the time requiredto load and unload for shipping.This lengthy chain and the discouragement of private investment in securing produce of a particularstandard, mean extremely high levels of wastage, which various studies estimate at 40-60 per cent (Kumar,Patwari et al. 17 May 2008; Upton and Fuller 2004). This begins at the mandi itself, where spillageoccurs in the bagging process and where a traditional compensation to the mandi labourer is sometimesthe produce spilled in the weighing area (Prahalad 2006)!A World Bank study (Mattoo, Mishra et al. 2007) 9 shows that the crowded and inefficient chain for freshfruit and vegetables, maintains the average price received by the farmer at only 12-15 per cent of theprice paid by the consumer, and this has been one of the key reasons why India’s horticultural sectorhas remained uncompetitive for export.It is to the wholesale mandis that street vendors, pushcart vendors and kirana store managers go dailyto stock up with goods and sell in their neighbourhoods. Studies differ in the estimated number ofunorganised grocery retailers in India. A study from IIM Bangalore estimates 12 million kirana storesbut it puts no figure on the number of pushcart vendors and neglects to mention at all those who sit inneighbourhood markets or on the street to sell their wares (Kumar, Patwari et al. 17 May 2008, 327). TheICRIER study states that one in every 14 Indian works in “the small stores which dot our neighbourhood”(Mint 28 April 2008).Unorganised grocery retail is characterised by extremely low operating costs (estimated in one studyas 5-3 per cent of sales) and low gross margins (10-15 per cent of sales). It is these low running costs,which secure small retailers good net margins and enable them to stay in a business, which depends oncrowded and inefficient supply chains. Low running costs are the result of low rents and tax evasion, aswell as low labour costs (Kumar, Patwari et al. 17 May 2008).What do these low labour costs mean for job numbers and job quality? Low running costs reflect theuse of family labour and the low levels of hired labour. Kirana stores and pushcarts provide a continuouslivelihood to one or two family members, perhaps only one income stream among several but onewhich helps to sustain a family, once it is combined with marginal farming or poorly paid wage labour;small unorganised retail provides self employment as an alternative to manual labour, especially valuablefor women, the elderly and less robust who cannot compete with the terms and conditions of the casuallabour market; it often provides a safe space for children to sit, study, help out, when their parents orcare-givers would otherwise need to be away all day at work.A WorldBank studyshows that thecrowded andinefficient chainfor fresh fruitand vegetables,maintains theaverage pricereceived bythe farmer atonly 12-15per cent of theprice paid bythe consumer,and this hasbeen one ofthe key reasonswhy India’shorticulturalsector hasremaineduncompetitivefor export.9Cited in Reardon & Gulati 2008, pg 41.157