Delhi, 21 August 2015
Thursday, the Rajasthan government signed an agreement with Kishore
Biyani's Future Group, best known for its retail chains Pantaloons
and Big Bazaar, to launch the new Annapurna Bhandar Yojana. Chief
minister Vasundhara Raje described the scheme aimed at an upgrade
of ration shops as the beginning of a new era of public
private partnership in the public distribution system. Raje
had earlier in July announced that public schools and health centres
will be handed over to private players under a PPP model.
Ration or fair price shops provide wheat, rice, sugar, kerosene,
and, in some states, edible oil and pulses to beneficiaries at
subsidised prices. On Thursday, Raje said the tie-up with the
retail giant will improve the lives of villages as the upgraded
ration shop in villages will mean that beneficiaries can buy all
goods at one store, like a shopping mall.
While the government is yet to make the Memorandum of Understanding
public, this is how the new scheme will work on the ground.
Will the ration shops be replaced?
No. The agreement does not mean ration or fair price shops in
Rajasthan will be replaced by rural and peri-urban versions of
Big Bazaar, or that the Future Group will now own or its staff
manage ration shops in villages.
Subodh Agarwal, principal secretary, food and civil supplies
department in Rajasthan, said that under the agreement, Future
Consumer Enterprise Limited, a Future Group company, will be able
to sell multi-brand consumer goods at ration shops. In the first
phase of this experiment, Biyani's company will supply processed
food items, home care and hygiene products to one-fifth, or 5,000,
of Rajasthan's 25,000 ration shops in cities and villages. Ration
shops will continue to be managed by existing ration dealers,
Agarwal said. He added that the 5,000 shops had been selected
on the basis of their existing capacity. In the next phase, more
may be brought under this scheme.
Currently, 4.5 crore of the total 6.8 crore or 67% population
buys subsidised wheat at Rs 2 per kg, sugar at Rs 13.5 per kg,
and subsidised kerosene from ration shops. They will continue
to get these at the same rates, while new products will be made
available. It will be the Future Group's responsibility to stock
and procure these through its own network, separate from the existing
public distribution network, said officials.
What's in it for beneficiaries?
More availability and choice in consumer goods, at discounts.
As per the agreement signed on Thursday, Future Group will make
available 146 items in 48 categories at the new Annapurna Bhandar
or the selected ration shops at discounted prices. As per a government
statement, the products that will be added to the ration shops
will include oil, ghee, pulses, jaggery, spices, flour, other
processed food such as noodles, wafers, biscuits, chocolate, personal
care products such as hair oil, shampoo, toothbrushes, home
care products such as toilet cleaners, detergent bars, mosquito
repellent", and stationery such as pens and notebooks. The
company will be required to stock products of multiple brands
instead of only procuring their own products, as per the agreement.
What will it do to retailers?
The entry of a large retailer with big pockets is expected to
hit the existing small retailers. In several villages, farmers
with small and medium size landholdings supplement their livelihood
with self employment by running neighbourhood grocery stores or
selling such items as soap and shampoo in small quantities. Their
businesses may be affected, if not immediately, then over a period
of three to five years.
Retail experts say the entry of Biyani's group may also have
an effect on suppliers as any large retailer will prefer to transact
with fewer large suppliers, rather than a high number of small
Officials said that though the government had been in talks with
several companies including Reliance, Sahara and Metro
before the launch of this scheme, when an expression of
interest was invited in January, only Future Group applied.
Retail experts said the move may open up a new market segment
for the group. By doing this, Biyani will be able to have
critical mass in the market, build an understanding of the segment
of the consumer serviced by this platform in Rajasthan, and potentially
use this as a springboard for building a new company, said
Devangshu Dutta, the Chief Executive of Third Eyesight, a retail
and management consultancy.
A retail expert working with a rival company, who did not wish
to be named, said the experiment may or not work for Biyani since
rural consumers prefer to buy in very small quantities, in the
form of pouches, for instance, which is different from the Future
Group's current consumer base. This may require the company to
re-engineer its processes to a significant extent.
Is this a first?
NC Saxena, a retired Indian Administrative Service officer, said
Kerala and Gujarat had already experimented with providing more
consumer items at ration shops.
Ashok Khandelwal, an activist with the Right to Food Campaign
in Rajasthan, cited the case of Punjab, which provides 18 consumer
items such as candles and low price cloth through ration shops,
to demand that Rajasthan also provide more items at controlled
prices to consumers. Between 2011 and 2013, 21 items were
offered at a few ration shops run by ration dealers who procured
and sold them, Khandelwal said. Some items such as
tea and salt worked fine, and were made available to beneficiaries
at lower prices, but in the case of pulses, there were problems.
The prices of pulses at ration shops went up higher than market
prices because of irregularities in procurement.
At present, local entrepreneurs apply to get the dealership of
running ration shops. In some villages, the Gram Sewa Sahkari
Samiti, or village level cooperatives, manage the ration shops.
This new scheme, Annapurna Bhandar Yojana, was started on a pilot
basis last August in six ration shops. Biyani's company got the
contract to run five ration shops in Jaipur, while the local cooperative
Gram Sewa Sahkari Samiti has been operating one upgraded Annapurna
Bhandar ration shop successfully in Udaipur.
Khandelwal argued that the government could have worked on smoothening
the procurement and allowed existing local entrepreneurs, ration
dealers, village cooperatives to procure and sell more items at
the upgraded ration shops.
Amra Ram, a former MLA of the Communist Party of India (Marxist),
said there was a risk that while the government might tightly
control the prices of goods in the initial years, it will stop
doing so later. "There is nothing to stop private players
from charging higher prices in subsequent years to make more profits.
The same pattern is visible in private hospitals and schools run
on cheap land from the state," Amra Ram said.
(Published in Scroll.in.)