Maharashtra govt asks retail chains to sell vegetables at lower rates

Retailers say they are being forced to sell vegetable at a particular price

Organised retail chains in Mumbai are finding it tough to comply with the Maharashtra government's directive asking them to sell vegetables at 30 per cent lower than the market rates.

Retailers told Business Standard that they are being forced to sell vegetable at a particular price. They added that in many cases, the government has threatened to cancel their direct marketing licence if they do not fall in line.

"In many categories, we do not make any margins. It is not possible to sell 20 items at lower rates as we have to make our margins at least in some categories," said K Radhakrishnan, CEO (fresh foods) at Future Value Retail. "We do not have any choice but to sell the goods at low prices. I do not know how long we will continue this."

He said the company will assess the situation after a month to see whether to continue with the scheme or not.

Ten Big Bazaar stores and five KB's Fair Price stores of Future group are selling vegetables at subsidised rates. Reliance Fresh, the supermarket chain of Reliance Retail is doing the same at more than 20 outlets. Tata's hypermarket Star Bazaar and Bharti's Easyday stores too are selling vegetables at lower rates.

In the second week of July, the Maharashtra government had started a distribution scheme, wherein it made arrangements at 10 stores of retail co-operatives in Mumbai to sell vegetables at subsidised rates. It also roped in a wholesalers' federation to procure vegetables from the collection centres of state-run Agriculture Produce Market Committee (APMC).

Subsequently, it asked retailers such as Future Group, Reliance Retail, D Mart and others to sell vegetables at lower prices. The state government comes out with a price list every day, which must be followed by the retailers.

"In vegetables, we normally do not make much money. We make 8 to 10 per cent gross margins apart from incurring store overhead costs. The government needs to understand this," said the head of a retail chain on condition of anonymity.

However, Maharashtra agriculture minister Radhakrishna Vikhe-Patil denied that the government had issued any directive to organised retail chains to supply vegetables at "fair price".

Vikhe-Patil told Business Standard that under the state government's initiative, there are about 100 fair price centres currently operational in the Mumbai Metropolitan Region. "The demand is increasing day-by-day. At the same time, institutions such as Sahakar Bhandar and Apna Bazar have voluntarily come forward and the government is supplying vegetables to them," he said.

"As far as malls and other stores are concerned, the government has not issued any directive for supply of vegetables at fair price. However, as per the provisions of direct marketing licence issued by the government, Reliance Fresh, Future, Metro cash and carry and the like are expected to source agricultural produce directly from the farmers and supply them at fair price for the benefit of consumers."

Vikhe-Patil added while it's not the government's job to sell vegetables, it will help put in place a proper supply chain.