FDI IN UPSTREAM, DOWNSTREAM AND SUPPLY CHAIN MANAGEMENT

This segment of India has seen least organised development, even in the reforms period. Due to lack of proper ‘market reforms’ in the area of agricultural products (as APMCs of different states have failed to develop) which hampered so many aspects of it—storage, grading, packaging, etc. It is

believed that this field needs huge investments from the corporate sector. The corporate sector has not been much attracted to this sector. Main factors for the unwillingness among the private sector to put in their money in it are, scarcity of capital, logistics, experience and non-conducive policy framework in the agriculture market. This is the reason why the Government of India has allowed more freedom to FDI in retail chain development. It is expected that the willing foreign firms will not only bringing the needed fund to the sector, but alongwith them India will get international experience and best practices.

To compete in the globalising world markets and to gain economic benefits out of globalisation, India needs the following features in its supply chain management:

(i) An organised retain sector

(ii) Proper levels of logistics

(iii) Fully updated data of raw materials, production, cropping pattern, etc.

(iv) International class packaging, care to wards phyto-sanitary aspects

It is felt that the above-cited features will be easier to manage for the top global players as they have fund, experience and a willingness to expand their businesses in the growing regions of the world.

To strengthen and broad base of the market, the Forward Markets Commission (FMC), which is the regulator for commodity futures trading under the provisions of the Forward Contracts (Regulation) Act 1952, has taken many initiatives such as:34

(i) Conducted awareness programmes in 2011, such as a media campaign under the Jago Grahak Jago Programme about the Dos and Don’ts of trading in the commodity futures market;

(ii) Police training programmes in the states of Madhya Pradesh, Chhattisgarh, Tamil Nadu and Delhi with regard to dabba trading / illegal trading;

(iii) A massive awareness and capacity-building programme for various stakeholders, with primary focus on farmers.

(iv) On the regulatory front, the FMC undertook measures for the development of the commodity futures market, which include ensuring

more effective inspection of members of the exchanges on regular basis and in a comprehensive manner covering all aspects of the regulatory regime.

(v) Bringing out a guidance manual for improving audit practices, prescribing penalty structure for client code modification and for executing trade.

(vi) Granting exemptions for short hedge for soyabean/oil futures, issuing directives for segregation of client accounts.