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Fdi Food Trading
Fdi Food Trading
Fdi Food Trading
FDI in Food Trading
19 July 2016 12:44
Context:
Government has decided to permit 100 per cent FDI under government
approval route for trading of food products
Permission has been granted only with respect to food products
manufactured or produced in India
Permission is also granted to trading of food products through ecommerce
Why this is done?
India's supply chain infrastructure like processing centres, cold storages etc.
is weak. This leads to large scale wastage of perishable food products like
fruits and vegetables, milk, meat, fish etc.
New FDI policy in trade for food would attract big players like Walmart,
Tesco, Amazon, Alibaba, etc. for investment in domestic food supply chain
In China, ecommerce is growing fast and food is a major part of the
business. India is expected to follow the trend
What are the challenges that needs to be tackled?
1. Essential Commodities Act :
Essential Commodities Act prohibits stockholding large stocks certain
listed items under the act by any one. While both food processing
industries and food retail chains need to hold large stocks for their
operations.
If industries do not hold large stocks with them, rapid price
fluctuations can throw them out of business in the long run.
2. APMC act :
APMC act puts restrictions in procuring directly from farmers in most
states.
This hampers their efficiency and dissuades them from large
investments, defeating the very purpose of the FDI policy.
What should be done?
Government should reform the APMC and ECA acts as soon as possible.
Initiatives like National Agriculture Market (NAM) are a good beginning in
dismantling the woes of APMC
Permitting FDI through the automatic route (rather than through approval)
will be a much desired step
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