Atma Nirbhar through Canteen Sales

Following Prime Minister Narendra Modi’s ‘Vocal for Local’ call and launch of Atma Nirbhar Bharat Abhiyan (Self-Reliant India Campaign), the government has taken a number of steps to promote indigenisation. The need for self-reliance has further been intensified by the Chinese belligerence and killing of Indian soldiers in eastern Ladakh and the subsequent public outcry for banning Chinese products. Some of the steps taken by the government include restricting predatory acquisition of Indian companies by China, disallowing global tender enquiries in government procurement of goods and services of up to Rs 200 crore, and banning video-sharing TikTok app and several other Chinese mobile applications which are considered inimical to India’s national security and public order.

In the defence sector, the government has also taken a number of bold steps to promote self-reliance in arms production. The Ministry of Defence (MoD) has tweaked its defence capital procurement manual and released the draft Defence Acquisition Procedures 2020 (DAP-2020) to enable greater procurement from the local industry. To provide a further fillip to indigenous arms manufacturing, the MoD has also promulgated a draft Defence Production and Export Promotion Policy 2020 (DPEPP-2020) for public comments, besides articulating a negative list of 101 items which are banned from import. An area where the MoD could push Prime Minister’s Atma Nirbhar campaign further is through the Canteen Stores Department (CSD) ­– an attached organisation functioning under the MoD – by mandating it to ban selling of imported items and dealing primarily with only India-made items.

Canteen Stores Department

The CSD was created in 1947-48 with the objective of providing “easy access to quality products of daily use, at prices less than market rates.”1 It caters to the uniformed personnel, ex-servicemen and their families, select paramilitary forces and defence civilians. At the time of its creation, the CSD had only four depots, a portfolio of less than 200 items and 400 Unit Run Canteens (URCs). Today, its operations cover sourcing and distribution of nearly 5,500 items to over 3,900 URCs through a network of 35 depots. The CSD, with a workforce of 2,500 and a turnover of nearly Rs 20,000 crore, is now one of the largest retail chains in India, catering to the requirements of 12 million consumers.2 Its product portfolio ranges from biscuits, shoe brushes to high-end cars and other luxurious items. The product portfolio of CSD is categorised under the following seven groups (see Table 1).

Apart from being an extremely convenient way of shopping, especially for the uniformed personnel and their families, the attraction of the URCs lies in the savings not only on the monthly grocery bill but also on the occasional purchase of luxury items. The price at which all CSD items are sold is invariably less than the prevalent market price.  This is made possible by the bulk-buy at a discounted price from around 600 suppliers and rent-free retail outlets run as URCs within cantonments and other establishments. This is a big relief as the rent of the property from which such utility stores are generally run constitutes a significant overhead cost which the retailers recover from the consumers.

An equally important reason why the retail price of the items is always lower than the normal market price is that the government subsidises half of the tax levied on the products. The total tax forgone by the government is around Rs 1,200 crore in 2018-19. Though the organisation is not driven by a profit motive, the savings accruing from rent-free accommodation and tax subsidy allows it  to charge a marginal profit (of 6.5 per cent on an average) on products. Significantly, despite the margin profit, the price of goods remains significantly lower than the market price in most cases. Half the profit is deposited in the Consolidated Fund of India (CFI) and the remaining half is used for the welfare activities of the beneficiaries.  During five years between 2014-15 and 2018-19, the CSD deposited a total of Rs 835 crore with the government.

Imported Items in CSD

Of the 5,500 items sold by the CSD, around 420 items are imported via various Indian suppliers. It is important to note that some of the items imported are manufactured by Indian companies operating in foreign lands.  The imported items are procured from around 25 countries that include Nepal, Bangladesh, Sri Lanka, Vietnam, China, the United States (US), the United Kingdom (UK), France and Switzerland. Among all the countries, however, China accounts for the bulk of the imported items. Some of the Chinese items sold in the CSD include toilet brushes, diaper pants, rice cookers, electric kettles, sandwich toasters, vacuum cleaners, sunglasses, ladies handbags, laptops and desktop computers.

With the government launching the Atma Nirbhar Bharat Abhiyan, and given the tension on the northern borders, the selling of imported items by the CSD, particularly Chinese goods, raises the question as to whether an MoD-owned organisation should be permitted to sell foreign-made items, least of all Chinese. This assumes importance considering that the taxpayers’ money is used to partly subsidise items sold by the CSD.

Banning Imported Items in CSD

It is important to note that a ban on selling imported items will not affect the interests of consumers in any manner. Suffice it to say that at present the foreign-made items sold through the CSD constitute about six to seven per cent of the total sales value. More significantly, most of the imported items sold by the CSD are luxury items, the use of most of which is limited to a few, since about 97 per cent of the consumers consist of personnel of other ranks and their family members. Moreover, almost all the imported items could be substituted by items made in India. In any case, those who are rigidly or otherwise attached to a particular foreign brand and cannot change their preference are free to access the outside commercial market to satisfy their needs.

Summing Up

In view of the Atma Nirbhar Bharat Abhiyan, the MoD may like to supplement the various domestic industry-friendly policy measure taken by the government with a ban on the sale of imported items through the CSD. While banning imported items, the government, however, could take into account the larger picture as some of the imported items are procured from Indian companies which operate outside the domestic territory. Moreover, some concession may also be given for items imported from friendly countries and with which India has preferential trade agreements.

The author gratefully acknowledges the vital inputs given by various government authorities.

Views expressed are of the author and do not necessarily reflect the views of the Manohar Parrikar IDSA or of the Government of India.

• 1. See History, Canteen Stores Department, Ministry of Defence, Government of India.
• 2. “An Illustrated Profile of the Largest Retail Chain in India”, Canteen Stores Department, Ministry of Defence, Government of India, 2016; and “Defence Services Estimates”, Ministry of Defence, Government of India