FDI in retail if kirana stores are unaffected: Subodh Kant Sahai

New Delhi: Minister of State for food processing industries, Subodh Kant Sahai has said that India could consider opening up its $330 billion retail market to foreign direct investment (FDI), once it is convinced that the neighbourhood 'mom-and-pop' kirana stores would be largely unaffected by big retailers.

According to Sahai, who was speaking at a conference on 'winning intelligent supply chains' organised by the Federation of Indian Chambers of Commerce and Industry (FICCI), ''The Department of Industrial Policy and Promotion has engaged an agency to make an in-depth study on the impact of FDI in food retail on the domestic market and the report is expected to be available by 2008.

Organised retail, backed by an efficient supply chain, has the potential of raising the rate of growth of the food processing sector from 13 per cent to 20 per cent in the next three to five years.'' According to the minister, the 11th Plan would see the Ministry launch a revamped comprehensive scheme for creating an integrated cold chain infrastructure at different levels, encompassing farm level primary processing centres-cum-cold chain, collection/aggregation centres, and strategic distribution centres.

Rajan Mittal, chairman of FICCI's retail committee and joint managing director of Wal-Mart partner Bharti Enterprises said that India had the potential to become the export food and fruit basket for the world, for which private sector involvement in the PPP model was imperative, given investments estimated at Rs100,000 crore.

Sahai and Mittal jointly unveiled the FICCI-Ernst & Young (E&Y) report on 'Winning with Intelligent Supply Chains', authored by Pinakiranjan Mishra, Partner, E&Y. The report, according to Mishra, ''is a comprehensive study on supply chain characteristics of major categories in India's retail sector.''

The report also highlights the Railways and its role in the supply chain and logistics management, estimating it to accelerate freight earnings growth by 100 per cent. The report also suggests the need for an additional warehousing capacity of around 35 million tonnes, worth nearly $1.88 billion by 2012, given India's large food production and a rising demand for a large and efficient supply chain.

Third party logistic providers, according to the report, have a significant opportunity of growth, given the outsourced logistics market estimated at $10.2 billion, and expected to grow at a compounded annual growth rate (CAGR) of 15 to 20 per cent during 2007-10. It identifies food and grocery retailing as a significant and lucrative retail opportunity for organised players, with bright prospects in the milk and dairy product categories, as well as fruit and vegetable categories.