Parliament has been witnessing quite a bit of furore over Foreign Direct Investment in multi-brand retail recently with brands like McDonald’s, PepsiCo etc. coming under the leaders’ line of fire. Politicians seemed to be quite enthusiastic in laying down ‘facts’ about these companies, when a little bit of research could have enabled them to speak with credibility.
According to the leader of the opposition Mrs. Sushma Swaraj, McDonald’s imports all the potatoes it uses, denying Indian farmers any gain from it. Her argument was to oppose the entry of large retailers such as Walmart into the country. A brief probe into the history of McDonald’s French fries in India can shed light on the ‘fact’ stated by Mrs. Swaraj.
McDonald’s had recently found that around 30% of the customers visit their outlets solely for the French fries. So, this is quite a serious affair for them. The fries are required to be of particular lengths. Initially when the company came to India, the potatoes here did not cater to the company’s needs in terms of size and texture. McDonald’s had sought permission from the government to import potatoes and promised to grow the crop here. With the help of its global partner McCain Foods, the company now has a unit in Gujarat which meets all its potato demands. The company has no need to import potatoes at all.
Moreover, McDonald’s buys lettuce, cheese, sauce and fresh buns, vegetable and chicken patties and other dairy products from India itself. The prices offered by the company in India are some of the lowest among its outlets across the world.
PepsiCo was next on Sushma Swaraj’s list when she claimed that the company had backed out on its promise to purchase tomatoes and potatoes from local farmers of Punjab. The company responded to this accusation by saying that all its potatoes are bought locally. In fact, the amount of potatoes procured by the company has doubled over the last 5 years.
The treasury benches also got their observations twisted. Kapil Sibal, Telecom Minister, reiterated that the dhabas had driven out KFC (Kentucky Fried Chicken) while the opposite was expected to happen. However, KFC plans to increase the company’s number of outlets from the current number 221 to 500 within 2015. One wonders if the dhabas are still intact.
However, Sibal might have a point when he said that Walmart stores would not mushroom in India all at once due to high real estate rates. Another reason could be the opposition from the states. Of the 53 viable cities where Walmart and other retailers can set up their businesses, only 16 belong to states approving FDI in multi-brand retail.
So, whether or nor FDI in multi-brand retail is good or bad, the leaders would have some advantage if they at least try to get their facts right.