Lush green fields greet visitors to the agricultural heartland in India's northwest, some dotted with tall bundles of paddy covered with black tarpaulin, exposed to the sun, the occasional thundershower and rodents.
A couple of hours away, workers wearing green hair nets and aprons clean and sort peas, tomatoes and potatoes in a 10,000-sq.ft. facility leased by Wal-Mart Stores , which ships vegetables and fruits to 28 supermarkets and a Wal-Mart wholesale store within hours of being picked in the fields.
India's woefully inadequate storage and processing facilities are in sharp focus as the country battles high food inflation, and with rising chatter about opening up retail to foreign firms such as Wal-Mart, Tesco and Carrefour which have the resources and knowledge to build a supply chain.
Waste due to poor post-harvest management, including lack of storage, is estimated at nearly 40 percent of total output in India, costing about 500 billion rupees ($11 billion) a year.
But it is a tough task, given the poor infrastructure, vast regional differences and laws limiting foreign firms to cash-and-carry wholesale outlets and franchise tie-ups with local partners in the $450 billion retail market.
The challenge is humongous: It is not just about making an investment. It's also about dealing with the government and farmers, said Arvind Singhal, chairman of Technopak Advisors.
Even with all the money in the world it can take years -- maybe 8-10 years for the kind of back-end you need, he said.
Retailers, who see India as a crucial growth market to help offset sluggish growth in western markets, say that building the back-end is not enough.
The supply chain is one of the big challenges, Raj Jain, chief of Wal-Mart India, told Reuters in a recent interview.
We are willing to invest whatever it takes in the supply chain, the back-end. But that in itself won't deliver all the efficiencies, he said, arguing for fully opening up the sector.
Euromonitor International forecasts grocery retailing in India will grow at about 17 percent annually between 2009 and 2014, putting it among the fastest growing markets in the world.
Even with the deep pockets of the world's top retailer, India is a tough market to crack, with tiny farms, antiquated processes, and differential policies and taxes in every state.
In the village of Haider Nagar in Punjab state, where Wal-Mart sources vegetables such as cauliflower and gourd, the retailer built toilets to prevent soil contamination, and teaches farmers about transplanting and nutrient management and the use of low-cost innovations to get a higher, better yield.
Every farmer must keep a book detailing every stage of the process so the life-cycle can be traced and checks maintained.
Wal-Mart sends its trucks everyday to pack freshly picked vegetables and fruits in plastic cases and deliver them at the processing center in Sirhind, about 50 km away, which handles some 20 tons of produce daily.
The vegetables and fruits are delivered at supermarkets of venture partner Bharti Retail and the Wal-Mart cash-and-carry wholesale store in Chandigarh city, a couple of hours away.
Wal-Mart sources about 35-40 percent of its produce directly from some 130 small and marginal farmers nearby, Jain said.
Building stores is the easiest thing to do. Keeping them stocked is the challenge, he said.
Maintaining quality and making sure commitments are kept is tough. We have to win the confidence of the farmers, he said.
That thought is echoed by rival Carrefour, the world's No. 2 retailer, which has toured the length and breadth of the country to secure supplies of bananas from Gujarat and onions from Nashik, and trained farmers on improving quality of output.
There are many, many layers, with commission agents, wholesale markets, distribution agents which increase time to market and costs, said Yannick Douville, a Carrefour director.
India has everything, but you need to be smart, you need to work closely with the farmers to get what you want, he said at an event to set up greenhouses in Palla village near Delhi.
The government has unveiled concessional duties and tax exemptions for refrigeration units and allowed external commercial borrowings for cold storage facilities. But it will take more to encourage investment. Unless there is a big front-end no one's going to invest billions of dollars in a cold chain or supply chain just to sell to some mom-and-pop stores, said Technopak's Singhal.
Still, the size and growth potential are too big to ignore.
It is the size of the opportunity that will keep retailers like Wal-Mart, Tesco and Carrefour interested, despite the hazy legal structure, said Jon Wright at Euromonitor International.
Ultimately, foreign retailers will have to work out whether or not the lack of clear legislation surrounding market entry and operation within India is worth putting up with in the short term, given the long-term opportunities that exist, he said.
(Editing by Dhara Ranasinghe)