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PepsiCo and Potato Case

What is the issue?

1. The uproar has been generated due to PepsiCo’s lawsuit against a few farmers in Gujarat for alleged infringement of the company’s patents over a certain potato variety.

2. This big corporation is flexing its market power to exclude farmers from their right to cultivate a crop variety of their choice.

3. PepsiCo has decided to withdraw the cases backed by an assurance from the government for a long-term amicable settlement.

Why is it disadvantageous for the farmers?

1. Farmers collaborating with PepsiCo in states like West Bengal, have frequently mentioned the higher costs of production and lower rate of productivity of the company’s processing variety in comparison to the conventional cultivars in the state.

2. The assured buy-back by the company has neither shield against the risk of rejection when their product failed to meet the company’s perception of quality nor ensured the buy back price are on a par with the market prices.

3. However, as per the estimates of the West Bengal Cold Storage Association, the number of farmers entering supply agreements with PepsiCo has increased by almost seven times over the past decade.

4. This indicates the dearth of marketing opportunities for the farmers.

How does the potato production and consumption trend affect farmers?

1. Over the past three decades, potato production has increased by 227%, from 14.86 million tonnes in 1988–89 to 48.6 million tonnes in 2017–18.

2. Consumption though almost ubiquitous has evidenced only 22% rise in per capita terms, from 14 kilograms in 1987–88 to 17 kilograms in 2016–17.

3. With a current population of approximately 1,330 million, the (direct) consumption demand for potatoes constitutes barely 50% of the current production.

4. Of the remaining 50%, a meagre 6% is used by the processing sector.

Which are the problems in the agricultural sector in India?

1. There is a general lack of market intelligence services and infrastructure facilities such as cold storages.

2. The current cold storage capacity in the country can accommodate around 70% of the total potato produce, if all these were solely dedicated to potato storage.

3. Recent increase in the rate of cold storage subsidy from 20% to 40% of the total project cost along with compulsory upgradation to cooling unit technology.

4. It would either incentivize more of multipurpose, multi-chambered, energy-intensive storages or make the cold storage technology unaffordable for the small farmers.

5. The food processing sector has received around $7.54 billion worth of FDI between April 2000 and March 2017, but it contributes only 8.39% of the gross value added in agriculture, indicating the dominance of low value-added production.

6. Reforms for 100% FDI liberalization is targeted towards primary processing, or for mere food retailing.

7. In the potato processing sector, technology transfer, capital inflow and assured marketing of the produce are restricted by the preponderance of informal, small-scale players, who hold more than half of the market share.

8. Big corporations exert their bargaining power to maximize their profits and pay the farmers just their labour costs.

Where is the way ahead?

1. Government must intervene to safeguard the rights of farmers in these cases.

2. Entering a contractual agreement with the limited number of organized players can avoid such cases in future.