NEW DELHI: Retail chains in India prefer tie-ups with big farmers that have irrigated farms. Small farms that are rain-fed are out of the reckoning.

A study on the Food Retail Chain and Supermarket Evolution in India has shown that the [emerging] Food Retail Chains (FRCs) prefer to do business with big and medium farmers who own two to five hectares of land.

As against this, the traditional or non-FRC businesses work with small farmers who own less than two hectares.

The top food retailers that have set up shop were identified in a study done by P.G. Chengappa, Vice-Chancellor of the University of Agriculture Sciences, Bangalore, at a workshop on Contract Farming here as Food World (Spenser's), Nilgiris, Subhiksha, Food Bazar, Trinethra, Giant, FabMall, Valdel retail (Family Mart).

Others in the organised food retail sector are Pantaloon, Mother Dairy, Margin Free Market, Dairy Farm, Metro Group, Adani, Bharti and Reliance. Foreign direct investment is permitted only in single brand retail and through franchise.

The total retail sales are to the tune of Rs. 231281 million, while the share of food, grocery and tobacco is Rs. 175426 million, said Dr. Chengappa at the workshop jointly organised by the United States Department of Agriculture and the Indian Council of Agriculture Research under the Indo-US Agriculture Knowledge Initiative here on Saturday.

His study showed that the supply chain adopted by FRCs is through the wholesalers/commission agents.

Some have formed farmers and vendors associations.

However, they have not been able to penetrate the fruits and vegetable markets. Besides, their rejection rate is rather high, the cost of which is borne by the farmers.

Presentations at the workshop showed that the FRCs were reluctant to offer low-interest credit to farmers or insurance to cover risks as part of the contract farming deals.

They wanted the government to step in for this.

There were suggestions for setting up regulated wholesale markets and consolidators on the western models to do away with intermediaries.

"Restrictive laws" and lack of a legal mechanism to regulate the farmer-corporate/firm link were identified as the major bottlenecks in the setting up of food retail chains and supermarkets.

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