After months of discussion,  the issue of FDI in retail is being deliberated in the Lok Sabha today.  In September 2012, the Cabinet had approved 51% of FDI in multi-brand retail (stores selling more than one brand).  Under these regulations, foreign retail giants like Walmart and Tesco can set up shop in India.  Discussions on permitting FDI in retail have focused on the effect of FDI on unorganised retailers, farmers and consumers. Earlier, the central government commissioned the Indian Council for Research on International Economic Relations (ICRIER) to examine the impact of organised retail on unorganised retail. The Standing Committee on Commerce also tabled a report on Foreign and Domestic Investment in the Retail Sector in May, 2009 while the Department of Industrial Policy and Promotion (DIPP) released a discussion paper examining FDI in multi-brand retail in July, 2010.  Other experts have also made arguments – both in support of, and in opposition to, the move to permit FDI in retail sales. The table below summarises some of these arguments from the perspective of various stakeholders as collated from the above reports examining the issue.

Stakeholder

Supporting arguments (source)

Opposing arguments (source)

Unorganised retail
  • No evidence of impact on job losses (ICRIER).
  • The rate of closure of unorganised retail shops (4.2%) is lower than international standards (ICRIER).
  • Evidence from Indonesia and China show that traditional and modern retail can coexist and grow  (Reardon and Gulati).
  • Majority of small retailers keen to remain in operation even after emergence of organised retail (ICRIER).
  •  Unorganised retailers in the vicinity of organised retailers saw their volume of business and profit decline but this effect weakens over time (ICRIER).
  • Other studies have estimated that traditional fruit and vegetable retailers experienced a 20-30% decline in incomes with the presence of supermarkets (Singh).
  • There is potential for employment loss in the value chain. A supermarket may create fewer jobs for the volume of produce handled (Singh).
  • Unemployment to increase as a result of retailers practicing product bundling (selling goods in combinations and bargains) and predatory pricing (Standing Committee).
Farmers
  • Significant positive impact on farmers as a result of direct sales to organised retailers.  For instance, cauliflower farmers receive a 25% higher price selling directly to organised retailers instead of government regulated markets (mandis).  Profits for farmers selling to organised retailers are about 60% higher than when selling to mandis (ICRIER).
  • Organised retail could remove supply chain inefficiencies through direct purchase from farmers and investment in better storage, distribution and transport systems.  FDI, in particular, could bring in new technology and ideas (DIPP).
  •  Current organised retail procures 60-70% from wholesale markets rather than farmers. There has been no significant impact on backend infrastructure investment (Singh).
  • There are other issues like irrigation, technology and credit in agriculture which FDI may not address (Singh).
  • Increased monopolistic strength could force farmers to sell at lower prices (Standing Committee).
Consumers
  • Organised retail lowers prices. Consumer spending increases with the entry of organised retail and lower income groups tend to save more (ICRIER).
  • It will lead to better quality and safety standards of products (DIPP).
  •  Evidence from some Latin American countries (Mexico, Nicaragua, Argentina), Africa (Kenya, Madagascar) and Asia (Thailand, Vietnam, India) reveal that supermarket prices for fruits and vegetables were higher than traditional retail prices (Singh).
  • Even with lower prices at supermarkets, low income households may prefer traditional retailers because they live far from supermarkets, they can bargain with traditional retailers and buy loose items (Singh).
  • Monopolistic power for retailers could result in high prices for consumers.

Source: ICRIER [1.  "Impact of Organized Retailing on the Unorganized Sector", ICRIER, September 2008]; Standing Committee [2.  "Foreign and domestic investment in retail sector", Standing Committee on Commerce, May 13, 2009]; Singh (2011) [3. "FDI in Retail: Misplaced Expectations and Half-truths",  Sukhpal Singh, Economic and Political Weekly, December 17, 2011];  Reardon and Gulati (2008)  [4. "Rise of supermarkets and their development implications," IFPRI Discussion Paper, Thomas Reardon and Ashok Gulati, February 2008.]; DIPP [5. "Discussion Paper on FDI in Multi-brand Retail Trading", Department of Industrial Policy and Promotion, July 6, 2010]


Recently, there have been multiple Naxal attacks on CRPF personnel in Chhattisgarh.  Parliamentary Committees have previously examined the working of the Central Armed Police Forces (CAPFs).  In this context, we examine issues related to functioning of these Forces and recommendations made to address them.

What is the role of the Central Armed Police Forces (CAPFs)?

Under the Constitution, police and public order are state subjects.  However, the Ministry of Home Affairs (MHA) assists state governments by providing them support of the Central Armed Police Forces.  The Ministry maintains seven CAPFs: (i) the Central Reserve Police Force, which assists in internal security and counterinsurgency, (ii) the Central Industrial Security Force, which protects vital installations (like airports) and public sector undertakings, (iii) the National Security Guards, which is a special counterterrorism force, and (iv) four border guarding forces, which are the Border Security Force, Indo-Tibetan Border Police, Sashastra Seema Bal, and Assam Rifles.

What is the sanctioned strength of CAPFs personnel compared to the actual strength?

As of January 2017, the sanctioned strength of the seven CAPFs was 10,78,514 personnel.  However, 15% of these posts (1,58,591 posts) were lying vacant.  Data from the Bureau of Police Research and Development shows that vacancies in the CAPFs have remained over the years.  Table 1 shows the level of vacancies in the seven CAPFs between 2012 and 2017. Nov 2The level of vacancies is different for various police forces.  For example, in 2017, the Sashastra Seema Bal had the highest level of vacancies at 57%.  On the other hand, the Border Security Force had 2% vacancies.  The Central Reserve Police Force, which account for 30% of the sanctioned strength of the seven CAPFs, had a vacancy of 8%.

How often are CAPFs deployed?

According to the Estimates Committee of Parliament, the number of deployment of CAPFs battalions has increased from 91 in 2012-13 to 119 in 2016-17.  The Committee has noted that there has been heavy dependence by states on central police forces even for day-to-day law and order issues.  This is likely to affect anti-insurgency and border-guarding operations of the Forces, as well as curtail their time for training.  The continuous deployment also leaves less time for rest and recuperation.

The Estimates Committee recommended that states must develop their own systems, and augment their police forces by providing adequate training and equipment.  It further recommended that the central government should supplement the efforts of state governments by providing financial assistance and other help for capacity building of their forces.

What is the financial allocation to CAPFs?

Under the Union Budget 2018-19, an allocation of Rs 62,741 crore was made to the seven CAPFs.  Of this, 32% (Rs 20,268 crore) has been allocated to the Central Reserve Police Forces.  The Estimates Committee has pointed out that most of the expenditure of the CAPFs was on salaries.  According to the Committee, the financial performance in case of outlays allocated for capacity augmentation has been very poor.  For example, under the Modernization Plan-II, Rs 11,009 crore was approved for the period 2012-17.  However, the allocation during the period 2013-16 was Rs 251 crore and the reported expenditure was Rs 198 crore.

What are the working conditions for CAPFs personnel?

The Standing Committee on Home Affairs in the year 2017 had expressed concern over the working conditions of personnel of the border guarding forces (Border Security Force, Assam Rifles, Indo-Tibetan Border Police, and Sashastra Seema Bal).  The Committee observed that they had to work 16-18 hours a day, with little time for rest or sleep.  The personnel were also not satisfied with medical facilities that had been provided at border locations.

In addition, the Standing Committee observed that personnel of the CAPFs have not been treated at par with the Armed Forces, in terms of pay and allowances.  The demand for Paramilitary Service Pay, similar to Military Service Pay, had not been agreed to by the Seventh Central Pay Commission.  Further, the Committee observed that the hard-area allowance for personnel of the border guarding forces was much lower as compared to members of the Armed Forces, despite being posted in areas with difficult terrain and harsh weather.

What is the status of training facilities and infrastructure available to CAPFs?

The Estimates Committee has noted that all CAPFs have set up training institutions to meet their training requirements and impart professional skills on specialised topics.  However, the Committee noted that there is an urgent need to upgrade the curriculum and infrastructure in these training institutes.  It recommended that while purchasing the latest equipment, training needs should also be taken care of, and if required, should be included in the purchase agreement itself.  Further, it recommended that the contents of training should be a mix of conventional matters as well as latest technologies such as IT, and cyber security.

According to the Estimates Committee, the MHA has been making efforts to provide modern arms, ammunition, and vehicles to the CAPFs.  In this regard, the Modernization Plan-II, for the period 2012-17, was approved by the Cabinet Committee on Security.  The Plan aims to provide financial support to CAPFs for modernisation in areas of arms, clothing, and equipment.

However, the Committee observed that the procurement process under the Plan was cumbersome and time consuming.  It recommended that the bottlenecks in procurement should be identified and corrective action should be taken.  It further suggested that the MHA and CAPFs should hold negotiations with ordnance factories and manufacturers in the public or private sector, to ensure an uninterrupted supply of equipment and other infrastructure.