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SPECIAL REPORT - India's food chain in deep change =2

by Reuters
Tuesday, 21 June 2011 04:23 GMT

moved, as he puts it, from talking a lot with hardly anyone listening to being heard every time he speaks.

Gulati says too much money is going into safety nets such as subsidies and minimum wages when the government should be investing more to boost agricultural growth and innovation.

India's agriculture ministry plans to invest about ${esc.dollar}4.8 billion in 2011-12.

"I would say you should have 70 percent of resources for growth and 30 percent for welfare objectives, but it's the other way around," Gulati says.

The World Bank has criticised the subsidies as highly inefficient. But they have powerful political supporters, especially Sonia Gandhi, president of the ruling Congress Party, whose vote bank has long been in rural areas.

Gulati also favours modernising distribution networks. Supply chains should be shortened, by making it easier for retailers and food processors to buy direct from farmers.

Although many states now allow retailers to do this outside the regulated local markets known as mandi, in practice poor infrastructure makes that difficult.

COLD STORAGE

Ganpat Chowdhary, 45, is a trader at a mandi in Pune. Surrounded by piles of rose and pale green mangoes sweating in the fierce summer sun, he has his own problems -- the perishable nature of his products.

About 30 percent of fruit and vegetable production goes to waste in India. Summer temperatures which regularly top 40 degrees Celsius (104 F) also mean fruit stored without chilling can ripen overnight.

Temperature-controlled warehouses are sprouting up across India but are mostly small-scale private enterprises.

"We are also keen to set up a cold storage facility," Chowdhary says. "It's essential, as damage levels are very high in fruits."

The National Horticulture Board's Kumar says wastage can be trimmed by increasing the amount of cold storage facilities available.

"We need good infrastructure to collect and aggregate farm goods produced in remote areas," he said. "They need to be delivered to consumers as early as possible.

Chowdhary, who's been in the fruit business for the past two decades, has a different idea.

"In the last four to five years, sales of fruit have risen by 25-30 percent. The next stage for us is to go back to the farm and process fruits."

That way he could sell direct to the supermarkets.

SUPERMARKET SUPPLY CHAINS

Devendra Chawla is showing off his display of chutney jars at a branch of a Big Bazaar supermarket in an expensive South Delhi neighbourhood .

Indians are increasingly heading to air-conditioned stores like this, where aisles are packed with choice instead of the tiny mom-n-pop stores where items are lifted off dusty shelves offering just one or two brands of essential groceries.

Chawla says Big Bazaar's size and presence across India allows them to buy from both big distributors and local suppliers.

He sees huge potential for those who get it right. "If the country is growing by 8 to 9 percent, incomes will increase and I think food as a category will get developed," he says.

"The market is so huge that it can absorb many more (retail) brands," says the clean-shaven Chawla, sporting the intercontinental look of open-necked check shirt and chinos .

"The supply chain and cold storage are also getting developed, so I think for the country and for our company, food is a big bet. It's huge."

But the government needs to invest much more in distribution infrastructure, he said.

"If we can develop good infrastructure and then supply chains and cold storage, I think that can make a lot of difference to the country."

India's supply chains are fragmented and often involve several layers of middlemen between tractor and table.

Its road system is clogged and underdeveloped, while railway freight turnaround times are slow with limited availability of refrigerated freight vans. Cold storage of about 24 million tonnes is woefully inadequate for the world's second-biggest producer of fruit and vegetables. All of this means availability of fresh produce is highly regionalised.

It's not unusual to see wooden flatbed carts loaded with vegetables and fruits right on the doorstep even in big cities -- very convenient for shoppers but it does increase the mileage and moves for produce and raising the chance of damage.

Back in Shivthar (Shiva's ground), transportation is also on Sable's mind as his daughter takes the evening's milk from their cow in a metal churn up to the end of the road for collection.

He says he'd like to sell to retail food chains because they offer higher prices, but it's hard to deal with them directly.

"It's a headache to arrange transport according to their needs. I prefer to sell to wholesalers. They buy from the farm gate, so I don't need to worry about the transportation delay and wastage," he says.

(${esc.dollar}1 = 44.746 Indian Rupees) (Additional reporting by Mayank Bhardwaj, Ratnajyoti Dutta, Rajesh Kumar Singh, Abhijit Neogy and Krittivas Mukherjee in NEW DELHI; Editing by Bill Tarrant)

Our Standards: The Thomson Reuters Trust Principles.

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