SOIL Report 2008 - ACCESS Development Services

Chapter VIIvalue goods in every neighbourhood. A neighbourhood approach offers opportunities for tie-ups withother retail services such as banks. Though the stores are small, the supply chain being developed to fillthem is quite radical.Reliance set out to re-gear supply chains for the full range of groceries stocked in their Reliance Freshstores (fruit, vegetables, pulses, grains, condiments, pickles, beverages, dairy products etc). It has facedsevere regulatory hurdles in engaging with the conventional supply chain for grains and pulses whichare subject not only to restrictions on how they are sold (see earlier section) but also to stocking limitsrelated to the mandate of the Food Corporation of India (FCI) and the government’s role in food security.Reliance has thus decided to await regulatory change and focus its efforts on horticulture: freshfruit and vegetables sourced from farmers nationwide but particularly in Tamil Nadu, Karnataka, AndhraPradesh and Punjab.The principle way the company achieves this is through collection centres (CCs), which operate alongsidelicensed rural mandis and purchase farm goods directly from farmers. In August 2008 there were 140CCs nationwide, with their distribution biased to those states where most sourcing is done. Until now,the only presence of CCs across the belt of northern and eastern states is in Jharkhand which now hastwo CCs. CCs aim to reach full capacity when procuring from a catchment of 20-30 villages at 10 tonne/day, while the current average is 1.5 tonne. 13 We can infer that if 100 farmers from each village use theCC, an average CC can hope to support the livelihoods of 2,500 farming families.Relianceis seekingto addressproductivity,to get croppingin horticultureand pulses upto global standards,and getfarmers beyondthe ‘140 days/year’ incomesyndrome.Selling to the CC, rather than through a trader or directly to the government-regulated mandi, offersfarmers several advantages. First, the more rigorous grading of their products means that farmers arepaid for quality. Farmers in Kerala report that they sell the best of their goods to Reliance and let thebalance go to the mandi (Krishnakumar 4 July 2008). Second, prices set at the day’s start and posted inthe shop (as well as text-messaged to those farmers carrying mobile phones) remain stable throughoutthe day, while mandi prices reportedly start high and decline as the day progresses. Third, farmers arepaid more accurately against weight, because digital machines are used as the farmer looks on. Fourth,payment is made immediately and there is less waiting time. Fifth, Reliance bears the cost of transportfrom farm to CC.The CCs have a role in encouraging new crops, including broccoli, lettuce, new varieties of tomato,and capsicum of different colours. Farmers take the risk of planting these for the first time, becausethey are confident Reliance will buy in response to urban demand. CCs also act as outlets for a rangeof agricultural inputs and the focus of extension activities through, for example, demonstration farms,‘polyhousing’, drip irrigation and mulching. A company official explained that Reliance is seeking toaddress productivity, to get cropping in horticulture and pulses up to global standards, and get farmersbeyond the ‘140 days/year’ income syndrome.Rather than limiting itself to a retail role, Reliance is developing a presence as a wholesaler in parallel. InAugust 2008, Reliance had 50 wholesale distribution centres (known as WSDs) nationwide, operatingalongside urban wholesale markets (like the Azadpur mandi in Delhi) and selling to unorganised retailers(pushcart and street vendors, kirana stores) as well as to hotels and institutions. The company plans toreach 200 WSDs by March 2009.The main rationale for the WSDs is a way to offer farmers an assured market - arguably more importantto him than the price - above what is currently possible through Reliance’s own stores. Further, spreadingthe benefits of its re-geared supply chain to other wholesalers and retailers may also be a political moveto counter the protests the firm has faced.But Reliance reportedly creates value in the process. As a company official explained, business is easily13A provincial mandi will typically manage between 1,000-2,000 tonnnes/ day.162