Who is afraid of FDI?

I am totally flustered with this onslaught of views on FDI in retail. As i started thinking about it myself, felt i should too add my analysis on this subject which might be different from what many an expert is saying.

Consumer seems to have been forgotten on this entire discussion and how it is going to affect him is not talked about much. Let us look back and re-visit our own neighbourhoods after the advent of Indian giants into the organised retail.

BEFORE ORGANISED RETAIL (BOR)
POST ORGANISED RETAIL (POR)
1
BOR Branded commodities for limited products, dependence on retailer for the quality & measurement
POR More branded commodities, some shop brands, giving better price n quality
2
BOR Rice n wheat staple diet, totally dependent on what the retailer stocks
POR More varieties, better stocking, easy to buy, transparent weighment
3
BOR Vegetables sold at mandi or on carts, not allowed to pick n choose, measurement suspect, min quantity compulsions
POR Shopping in comfort, more organised outlets (not necessarily big names) selling produce. No restrictions on min quantity you buy, electronic weighment, computerised billing for better transparency
4
BOR Very few items door delivered, mostly monthly purchases
POR Even less than Rs.100 purchases door delivered, salt/bread/eggs, you name it everything is door delivered. (even liquor in few cities)
5
BOR Medicines, one had to go the shop n buy, bill needed to be demanded
POR Door delivery, discount stores (Medplus), chain stores (Apollo Pharmacy) with buy any where facility (for pre-deposited money with bonus value), credit/debit card payment
6
BOR Purchase only across the counter, Kirana list a must, so that you dont forget, consumer offers not well displayed
POR Convenience shopping (some places with air conditioned comfort), new products displayed well, consumer offers, shop offers, bonus mileage points on purchases
7
BOR A job delegated to servents as you are not comfortable going there
POR Consumer is happy to go and do their own purchases, buys what he wants and can make sure expiry dates are under control
8
BOR Fake labels, wrong measurements, adulteration(still prevalent in small town India)
POR All issues addressed where organised retail is present, cant say for sure about Bharath n it's villages
9
BOR Make do with what is available, limited choice
POR Segment wise retail Local, Regional, National & International names offering more n more choice with better quality n VFM

Now this is something which we have witnessed in the last decade for our own comfort and betterment of our living standards. As they say with higher choices more cash outflow n less savings. This is being justified with higher incomes at all levels.

In this process have we seen shops closing down or transforming themselves. A case study i would like to quote is the Vegetable mandi's in Chennai city. In every locality there were outlets selling fruits n vegetables (Pazha Mudhir Cholai's), sourcing their goods from Koyambedu wholesale market. They were offering certain comfort to the shoppers with their own innovative methods. This was an improvement from the old system of going to specific local markets where the produce was spread out on the floor and you had to interact with abusive vendors. Then came the 'Fresh' outlets offering air conditioned comfort while shopping for the same products. Some of these 'Fresh' owners approached these Pazha Mudhir Cholais to become their franchisees, how ever these enterprising business persons chose to transform their business rather than give in to these 'Fresh' chains.

Today these outlets have electronic weighing machines, computerised billing, whether you buy 44 grams or 1025grams. Boys are trained to use computers, no one is complaining as they pay for what they buy and are in a position to pick n choose the freshest fruits or vegetables.

Let us look at our neighbourhood Kirana merchant, has he shut shop after the big name super bazar's came into existence, no he hasn't, he has improved his customer service, making sure he gives the people groceries n more, which have been inevitably forgotten to be picked up from the supermarket as the consumer is slowly forgetting the 'Kirana List' and cant run every time to the supermarket. Thanks to the parking woes it is the local Kirana guy who stands in taking care of the door delivery. No one is complaining as there is enough business to all.

Coming to the so called big supermarkets like Walmarts, there are some ares where they could make a difference but certainly not in the commodity and food product area. We Indians do not prefer to buy food products in bulk (traveling long distance) either due to space constraint or our eating habits. Fruits n vegetables are always preferred to be purchased periodically as much our refrigerator might allow us. Meat also people prefer fresh meat compared to cold storage stuff, that is the reason, still we have neighbourhood meat shops doing good business. With all this whom is it likely to affect. Products, if our industry does not have the scale and is not competitive, they are likely to suffer as products will be imported by these mega shops and sold attractively to the consumers. It would be up to our industry to shape up n deliver quality products at good prices.

Even here if one looks at it, today we are seeing a huge spurt in local brands of furniture, White goods stores ramping up and increasing the number of outlets so that the consumer doesn't have to travel long distances for their needs. National players like E-zone, Croma, R-Digital making their presence felt with outlets coming up in towns with less than one mil population. With FDI coming in they are likely to sign up with international names or much better get funding to fight the giants.

It is noted some enterprising shop keepers going n buying in bulk goods which are being sold on deep discounts (a price which he cant demand from his supplier) at these mega outlets and sell them in their outlets.

In all this, we the consumer how are we going to be affected, will we not benefit with better service, better customer care and attractive pricing, then why are our politicians protesting on our behalf about this FDI in retail, is this the most pressing issue in our country, cant they take up inflation n corruption which are bothering us much more.

New Capital selection for a New state

It doesn’t happen in the independent India that a state is formed everyday. Many a new state is carved out from an existing integral state on various situations. Some times it is linguistic, some time administrative prudence etc.

Many a time this has happened and states are formed and a newly formed state has to create its own integrated capital. Many a time this opportunity is wasted by vested interests who will try to use one of the cities and make a mockery of the selection, in turn creating major problems to the people living there.

Selection of a state capital should be done with intent of making it only as a political and administrative capital and not an industrial township. Once upon a time Delhi was such a capital. Most of the property was owned by the government and even land for public utilities like fuel stations were leased out by the government. However this scenario got changed with the advent of Gurgaon, Noida, Faridabad etc each place vying to out beat the other with incentives for industry and now what we see of our nations capital is a story of decay and dismay.

We have Gandhinagar a state capital of Gujarat which is purely an administrative capital and has been designed so well that you will not find any kind of congestion or filth that is normally associated with many a state capital.

We do not need the capital city to be encircled with industry, what is needed for a capital city is connectivity for people to reach there through convenient mode of transport. We need place for the government to function; we need government employees to be accommodated with few kendriya vidyalaya’s or their ilk to be functioning to ensure their children get proper education. For the visitors who are coming into the capital on work to stay some kind of economy to hi-fi hotels/guest houses.

Entire new state needs to be mapped for it’s growth potential, a detailed planning has to be done keeping in mind the natural resources available in that new state. Ports, industry, commerce need to be planned to be set up through out the state rather than coveting it to one region or one location, which will only lead to further unrest. Once again look at the example of Gujarat, we have cities like Vadodara, Surat & Rajkot which are more industrially flourishing than the Ahmedabad, which is considered as the quasi capital due to it’s proximity to Gandhinagar. Even real estate is more expensive in these cities compared to Ahmedabad. Today in Gujarat far flung areas like Jamnagar & Bhuj are under development with many a industry being set up in those areas, keeping in mind the natural resources.

Yes one aspect which might be a necessity is availability of water source while selecting the new location and selection may keep this factor in mind rather than investing billions of rupees to pump water to the capital akin to Bengaluru and Hyderabad.

Let us take a possible scenario of Andhra Pradesh. If Telengana is separated as some segment of the population desires for the same, what will be left of this huge state will be the SeemAndhra region. This region will have vast coastal area, mineral rich lands, hard working and enterprising populace. It is also endowed with Grand Trunk roads, and major railway lines criss crossing the region.

Today Vishakapatnam is already an industrial town and continued to be developed as one. Earlier a Petro corridor was proposed by the previous government, which could be revived between Kakinada & Visakapatnam, due to the availability of Natural gas in that region. Power plants are being proposed in the coastal area due to it’s proximity to the ports and also to facilitate use of sea water for cooling the boilers. While more power generation is desirable, the installation should not be concentrated and proper measures should be taken to ensure environmental protection.

Vijayawada had always been seen as a commercial capital and could be developed accordingly. Guntur district is known for its lime stone deposits and focus could be the cement industry. Due to the integral connectivity between Tenali, Guntur & Vijayawada by railway line it could be a very good modern mahanagara which could focus on ITES services.

Tirupati & Nellore could be focussed for ITES services due to their proximity to Chennai and connectivity too. Rayalaseema can become a major industrial space utilising the natural resources & minerals available there. Similarly Srikakulam & Vijayanagarm could be industrial hubs. Prakasam district could focus on Granite industry and with the advent of a port it could export all its material from that port.

Districts like Godavari’s & Krishna can come up with food based industry and could exploit the ports in a big way. Chittoor district could be focussed for fruit based industry. With a dedicated planning and integral development of each district we can find the state flourishing rather than just the capital city.

Just in case Hyderabad becomes a Union Territory, Telangana too would have the advantage of developing the state in an extensive manner instead of entire growth being centred around the capital city as they too might have to choose their new capital.

Instead of fighting for the spoils, people have to become more practical and help their state to develop into a progressive state, which will in turn help them to be rewarded through the growth.

Jai bolo to a smaller state with integrated development

Land Acquisition - Some solutions

It looks like suddenly the whole country is erupting with agitations against land acquisition by either government or for private projects. This phenomena is probably a result of increased awareness among the affected added with local/National NGO’s standing with them in their struggle.

However there is one point which we need to consider, land is required for development be it either industrial growth or for infrastructure creation. Without land, how do we ensure projects are implemented. We have seen many a project getting delayed simply due to road blocks that are created in securing the land required for projects like national highways and still there are many stretches across India where four lane highways become two way due to legal hurdles in taking over the land on one side.

At the same time there is many an instance where land has been acquired promising jobs and settlements and nothing happens thereafter, making the person who surrendered the land in good faith for development rue his decision. These situations cause the heart burn and are the fuel for many a fresh agitation.

What are the issues? Primarily a farmer feels cheated when he sees the land price shooting up just after he has handed over the land either by force or pleasure. This happens simply with the announcement of a new project the real estate value around that area goes up and the person who is facilitating the development looses out. Secondly lot of promises are doled out either by the politicians or the private entrepreneurs that the land owner will be provided with a job or some equity etc.

Due to the reasons best known to them the promises are not kept up once the land is acquired, in some cases the projects don’t come up at all. This is a much more dangerous situation where in good fertile land is made to go waste and which is a loss for the GDP too.

Some ways to overcome this problem.

1. A fair acquisition price which shall take the market price other than the guideline values, future growth potential once the proposed project materialises (a formula which our esteemed economists can come up with) and the loss of revenue for a specified period where in the landowner will neither have cash for further acquisition of land elsewhere nor land to cultivate.
2. Whose ever land is acquired should be given TDR’s (Transferable Development Rights) on a proportionate basis in addition to the fair compensation, which could be used by the farmer/land owner in an urban area falling within 250kms radius, irrespective of state boundaries. In case there are two or more urban areas falling within this distance the choice could be with the seller where he would like to sell it, since the TDR’s are market driven, that is one opportunity; the land owner could enjoy and will not have a reason to complain or object to the surrender of the land.
3. Land seeking companies be it private, public entities or organisations like NHAI or any other State Infra Development companies should have strict land utilisation norms. First land should be allotted or provided only when they submit a detailed project design and clarity on why they require the extent of land that they are seeking. (Ex: A shoe manufacturing company in Tamilnadu acquired 250 acres for Phase 1 and another 200 acres for Phase2) Makes people wonder whether they are hoarding the land or really need it. This is one of the biggest issues in the present day.
4. Once the land is allotted the land seeking entities should have a strict project implementation clause. If the project is not implemented there shall be huge penalties imposed on the company and part of the penalty proceeds should be shared with those who have surrendered the land. This will act as a deterrent on land seeking entities in trying and getting land allotted without tying up their finances or citing reasons like recession etc for not starting the business as promised.
5. In case there is no action from the entity to set up their proposed units the land should be seized back without any compensation and sold to the next buyer. This would set a good example for all the greenhorn SEZ establishers, who have only dreams and no cash to make the project a reality.

The above solutions should address both the so called land-grabbers greed and also the landowner who is made to surrender the land under forced circumstances.

Recently some of the state infra development bodies have come up with land extent that they should allot for specific industry segment, this should be done after a thorough study of both national and international models.

Bring transparency in the whole process, instead of making the politicos and babu’s richer the government should bring in clarity with their area development plans on a 10-20 year vision documents. These documents should be bound on future governments and also should take into consideration wholesome development of the entire state rather than couple of regions which is what is happening today and causing the disharmony among the people. After having experienced the growth post liberalisation and also communication revolution, our babu’s should be competent to draw vision documents in a wholesome manner. These documents should consider various factors like suitability for specific development, present status and future potential based on socio-economic nature of the populace. First 5-10 years the development should be designed concentrating around the district head quarters, next five years should be concentrating around the other urban bodies, Taluq/Mandal head quarters next five years should focus on other locations.

This kind of exercise will eliminate politician/ babu specific developments and will make every state a growth centre.