Jayalalithaa – in this instance – is right.

The Financial Times recently ran several articles about the decision of the Indian cabinet to allow foreign retailers to buy a 51% stake in Indian supermarkets and own single-brand retailers outright. 

One reports a fierce political backlash against the decision from Jayalalithaa, the chief minister of Tamil Nadu, who warned that the entry of multinational retailers would lead to a dominance that would decimate local retailers and force millions of people out of work. 

Jayalalithaa – in this instance –  is right. 

Philip Jennings, the general secretary of UNI Global Union said, “We are appalled by this decision and stand fully behind the trade unions in India who have made it clear that opening the doors to foreign companies like Walmart will be catastrophic for India’s small traders. 

Philip Jennings is right.

The FT’s Editorial Comment appeared to show some insight, stating that the biggest challenge could be the knock-on effects: a consolidated retail sector would require consolidated agriculture to supply it: “Such changes could cost millions of Indian farmers their livelihoods. With no functioning welfare system that is a serious worry.” 

However it concluded that the Indian government must now prepare measures to absorb this surplus labour. 

No – the Indian government must be warned by the British experience. 

As Hon. Secretary of the Fair Deal Food Council of farmers and growers, set up to address the unethical practice of the large supermarkets, who pay many producers of milk, meat, fruit, vegetables, poultry and eggs less than the cost of production,  I can say that Jayalithaa is right: the growth of these practices has led to: 

    • high streets with large numbers of empty shops as small traders are forced out
    • farmers leaving the land because they cannot get a price which covers production and living costs
    • and the same percentage of farmers committing suicide in Britain as in India. 

Karen Leach, co-ordinator of an NGO with which we work, says: “We have long promoted the notion of “UK fair trade” in recognition of the fact that – whilst the severity of human impact will be less than that on many farmers in developing countries who have no welfare system – UK farming livelihoods face equally ruinous  pressures from the below-production-cost prices paid by supermarkets and other buyers.” 

Champion MP Andrew George deplores supermarkets gaining ‘the upper hand’ over a decade ago. He chairs and co-ordinates the “Cross Cutting” Group [CCG] of organisations and academics which submitted evidence to the Competition Commission’s sector inquiry into the groceries market, highlighting the unfair treatment of suppliers by the big four supermarkets. 

The CCG recommendation to establish a new Supermarket Watchdog has been accepted by the Competition Commission. 

 Its inquiry had discovered that big retailers consistently: 

  • delay payments to suppliers – a practice that can push small companies out of business, and people out of work;
  • reduce the agreed price of an order after it’s been delivered;
  • require payments from suppliers when supermarket profits are not as big as expected;
  • require suppliers to contribute to the cost of opening a new store;
  • change orders at the last minute – for example, demanding different packaging and forcing suppliers to pick up the cost. 

Successive governments have not kept their promises 

But that was 11 years ago and though a Draft Bill has been published, under the current timetable, with a full Bill not due until after May 2012, the Adjudicator might not be in place until 2014 or 2015. 

Why? 

Large corporations and government are very close. The large supermarkets give donations to party funds and sponsor conference events. They also offer lucrative full or part-time appointments to bolster the incomes of friendly MPs, Lords, civil servants and advisers, some of whom who pass forwards and backwards through the revolving door between government and corporate employment, taking with them their influence, contacts and inside information. 

This form of corruption is rife in England, rarely in the form of cash in brown envelopes but even more effective. 

As MP Andrew George said: “Every day food producers are going to the wall. And many more are struggling as a result of the market distorting power of the large supermarkets. Every day this happens means that the proposed supermarket watchdog is being introduced another day too late.” 

He dismisses the British Retail Consortium’s opposition to the policy, and claims it could increase retail costs and push up food prices. The estimated running costs of the Adjudicator represented a fraction of retail turnover and could “easily be borne, particularly by a sector that is posting the largest profits in its corporate history”. 

So, India, welcome large supermarkets if you want to damage your food producers and small and medium sized businesses.

And potential customers should examine their loudly trumpeted claims to cheapness as was done, briefly, in  Supermarket myth – Bull Ring market reality.

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