New Delhi: The most serious issue, which Indian farm industry faces, is the wastage of almost 40 per cent of farm produce due to lack of cold storage facilities and adequate transportation, said a study, Farm to Retail, by the Indo-American Chambers of Commerce.

This lack of infrastructure coupled with several layers of intermediaries, who do not add any value to the product significantly raises the cost of the final product available at the retail shelf.

"The price paid to farmers for fresh farm produce is currently about 30-35 per cent of retail prices as compared to the international norm of more than 50 per cent of retail price," said Deepak Pahwa, national president, IACC. "This differentiation is primarily due to the farm sector being predominantly unorganised in India. Organised retailing in F&G segment can drastically improve supply chain and boost farmers'' incomes and will bring a more structured growth to the whole sector."

Indo-American Chamber of Commerce notes that the Indian government has been targeting a growth rate of 4 per cent in the agricultural sector, against the growth rate of 1.8 per cent over the last few years. The IACC study looks at the issues affecting the farm-to-retail process in India to understand why this problem exists in a nation, which is predominantly agricultural.

Typically a farmer gets a return of up to 14 per cent on his produce, the trader adds his 12 per cent to it, and the retailer charges the consumer an additional commission of 12-15 per cent. By the end of this three-step series, the consumer ends up paying over 40 per cent extra for the produce, without any value addition.

Pahwa added, "The agriculture sector needs diversification, modern marketing, and cold chain management and private sector linkages. While India is the world''s second largest producer of fruits and vegetables, only 2 per cent of the produce is processed. As per a recent study on the food-processing sector, the turnover of the total food market is approximately $70 billion, out of which value added food products comprise $ 22 billion. The government has been encouraging FDI and joint ventures for food and agro processing industry and 100 per cent export-oriented units are being encouraged."

IACC plans to focus on the sector in its forthcoming Indo-US economic summit slated to take place in September.

IACC''s suggestions:

• All the different taxes, including inter-state taxes and local mandi taxes should be amalgamated into one nuclear tax.
• The sector needs an exponential increase in the number of cold storage facilities across India. This should include facilities ranging in all capacities from low to high, thus eliminating wastage while transporting the produce.
• Further development of the organised retail sector should lead to reduced role of middlemen. The direct procurement route results in a greater margin for the farmers, besides facilitating the creation of a market with multiple sellers and buyers meeting at same platform, eliminating the old fashion of few buyers and many sellers, thus resulting in monopoly after some time.
• State governments should develop, put on the fast track integrated farm-to retail, cold chain and warehouse infrastructure in partnership with the private sector.
• Ensure farm-sector enactments such as Warehouse Bill, should be presented in this session of Parliament, to enables farmers / retailers to get payment against warehouse receipts. Also, concessional land should also be provided.
• Encourage farmers to participate in agro-commodity exchange, to hedge their risks.
• Private sector participation should be promoted through contract farming and land leasing arrangements to allow accelerated technology transfer, capital inflow and assured market for crop production, especially of oilseeds, cotton and horticultural crops.
• Farm incomes in India can double if organised retail enhances farmer realisations on food items from the current 30 per cent to 35 per cent of retail price to the international norm of over 50 per cent.
• In order to perk up the growth rate to 4 per cent in organized retailing an approximate investment of Rs3,00,000 crore would be required.