Thursday, October 4, 2012

Will FDI combat the agro-politics in West Bengal?

The answer probably is "we will never know." We will never know until it is implemented. Meanwhile, there are strong protests from different corners.

Kaleidoscope thought this is a high time share his experience with cold storage politics in Bardhaman, West Bengal.

The story:

Kaleidoscope went to Baghnapara region where annual production of potato has been quite high. The troubles which Kaleidoscope and his boss had, was with the losses of farmers both with under and over productions of Potato and an increasing rate of farmers' suicide. Kaleidoscope visited several stakeholders of the cold storage including the farmers, middlemen, local political personalities, storage owners, investors and a couple of families having their members committed suicide because of huge loss and indebtedness with potato cultivation.
The story goes roughly like this:


A. Farmers' decision to cultivate potato

B. Local loan providers' willingness to lend money.

C. Store-owners's assurance of giving space to store


A. Production with huge loaned amount - resulting selling off potato at throwaway price.

B. Production but space crunch at storeage - resulting selling off potato at throwaway price.

C. Having space and holding potato for right price - high interest rate of the loan providers and ultimately selling off the potato bond (the paper which contains information regarding the amount of potato deposited) to the loan provider at considerably low price.

D Holding potato - but then sudden fall in the price rate incurring loss

Politics and economics of potato bond

The potato bond usually goes from one hand to another in exchange of money. Quite often the money is borrowed from local money lenders - who frequently is the cold storage owner or a large share holder. Therefore, at the end of the season, the entire produce of the region goes under control of a handful of people who can then control the market price effectively. Their political nexus is strong enough to influence regional leaderships.
The potato chain, (ref. Nath, Suman and Chakrabarti, Bhaskar. (2011). Political Economy of Cold Storages in West Bengal, Commodity Vision, 4(IV): 36- 42

What FDI promises:

So far Kaleidoscope understands, FDI promises direct purchase of items from the farmers and then direct sell to the consumers, so as to remove the price hike and less payment to farmers by the middlemen. Kaleidoscope's cold-storage experience much plausibly suggests that FDI would definitely improve the condition of the small and marginal farmers. Kaleidoscope however is living with a few questions.

The questions:

1. Does a state like West Bengal have the infrastructure where foreign traders can go to remote villages and purchase items directly from them? 
If they does not, wouldn't it create a new class of middlemen who will make profit by directly procuring items and selling them to the traders?

2. Could not we make better financing system available at the villagers so that the money lenders fail to exploit them? 

3. Shouldn't we make stronger agro-cooperatives who can directly deal with the markets, even if there is no FDI?

3. Should not we make a concrete data bank on cold-storages and their distributions and start imposing regulatory mechanism so that local co-operatives can work effectively?

Kaleidoscope thinks that if these infrastructures are build up, agro-cooperatives can negotiate with foreign traders better and make most out of it. If the negotiations fail they can independently build up marketing mechanisms for better profit and better price.


  1. No one has compelled West Bengal, or for that matter any state to invite FDI! It is still a state's choice. I agree the state needs huge investments in infrastructure. That can only happen if industries are build up. So far, there is no sign of it...

    1. Yeah, no one has ever compelled any one to do experimentation with nuclear power, but once it is there, it spreads rapidly! Without regulations, FDI can act like an atom bomb. You are right, West Bengal needs industries to fill the existing gaps.

  2. A timely post Kaleidoscope. Please send me a copy of the paper, I would love to read it. It must have been a tough ethnography to conduct especially with the storage strongmen.

    Dont you think that with FDI, at least we have a chance of combating these middlemen?

    FDI will certainly give foreign investments and raise the GDP growth rate of India up for a while. Surely, without regulations this is going to end in a massacre.

    1. I don't how could a parliament like ours put regulations on foreign corporations.

      I agree with FDI, we have a high chance of removing these middlemen, but again this may create a new generation of middlemen in the remote places. There are places in India where poor farmers cannot even afford the transportation cost. Do we need to believe that the foreign investors will go every corners of this country, even in North East? If they invest in a selective way, would not it further create divisions within the country??

      I seriously do not believe in growth of GDP to be the prosperity of a country. Much inspired by
      "Beyond Gdp - Measuring the Wealth of Nations" by Tina Wenzel

  3. Do you think we have a choice? When the parliament gives opening for FDI in every sector what should the states do? I feel that the corporations will now seek to invests in a selective way. I agree Kaleidoscope, this will further the divide in country.

  4. If FDI will enter in India it will effects a lot on Indian Economy. Many of the retail outlet will remove, although some of the peoples will get benefits like many will get good salary.

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