Kishore Biyani, managing director of Pantaloon Retail and chief executive officer of the Future Group, says he will set up 1,500 'fair price shops' (or FPS) all over India in the next two years. The loaded FPS terminology (as though all other shops charge unfair prices) is borrowed from the government, whose subsidy-driven schemes for selling foodgrains, sugar and kerosene cost the exchequer a packet and also result in large-scale leakage of supplies to other shops that sell at 'unfair' prices. The government has not been able to take the idea to the areas where the poor reside. Undeterred, the Future Group's managing director, Narendra Baheti, says they aim to capture 20 per cent of the retail market in the catchment areas where their new fair price shops will be located. Apparently, it costs only Rs 280 per square foot as capital to set up such a shop, compared to Rs 2,000 per square foot for the air-conditioned, modern superstore.To be sure, sales per square foot in the small stores will be noticeably lower than in their glitzier counterparts, but that is carping. Indeed, the ambitious target for market share may not be an empty boast; Biyani has already made a success of his Big Bazaar chain, and what he says about retailing should be taken seriously. He says he will sell the leading brands of around 300 essential goods at a 10 per cent discount, and products of local brands at a 20 per cent discount. If he can do that, it will take care of the needs of both, the lower reaches of the middle class as well as the poor.The sceptics will say that this is nothing more than a tactical response to the prospective entry of mega-retailers like Wal-Mart into the Indian market. But the key issue is not that Wal-Mart is coming, in partnership with Bharti. It is that Kishore Biyani is willing to do something that nobody but the government has tried: setting up a large chain of 'fair price shops' so as to reach out to people whom Wal-Mart style big-box stores and the new malls will never reach. Though the government conceptualised the FPS scheme (along with other price-control initiatives like the Super Bazaar in Delhi), it failed miserably in making it work in a manner that truly benefits the poor and the not-so-rich. In its zeal, the government set up almost 500,000 ration shops around the country""which is impressive if you consider that India has only 600,000 villages, except that the bulk of the shops were in towns and the districts with the largest numbers of the poor were neglected. For other reasons as well, not the least of which was the usual sleaze and sub-standard goods, only a minority of these shops fulfills their stated purpose. The rest just feed at the subsidy trough. A study by the National Council for Applied Economic Research in 2005 clearly demonstrated this in respect of kerosene, which the poor use as fuel.Perhaps it is time, as in so many other cases, for the government to roll over and let the private sector take over. Kishore Biyani and men like him who have a grasp of the way the Indian consumer's mind works, need to be given a chance because they will look at supply efficiencies instead of subsidies. The to-do over foreign direct investment in retailing misses the point, which is that India has an inefficient system of internal trade and distribution""the middleman takes far too big a cut for the role that he plays. If people who understand how to achieve market efficiencies and today's retail opportunities are allowed entry, if the roads improve (thus speeding up goods transport and thus extending the supply chain) and if a cold chain can be set up across the country, the poor will benefit as much as anyone else.
