Lobby groups in India have hit out at the entry of multinational retailers into the country amid claims that Germany’s Metro has violated its license to operate cash-and-carry outlets.
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The Federation of Associations of Maharashtra (FAM), a body opposed to foreign investment into the Indian retail sector, said Metro had infringed regulations surrounding the cash-and-carry sector.
C. T. Shanghvi, an FAM official, told just-food today (4 October) that companies multinationals were using their presence in India’s cash-and-carry channel as a “back door” into the mainstream retail sector.
The Indian government has banned direct foreign investment into India’s burgeoning retail sector but overseas firms can enter the cash-and-carry market – under strict conditions. One condition is that cash-and-carry operators are allowed to sell only to retailers and not directly to consumers.
However, Shanghvi contends that the likes of Metro have broken regulations governing the sector by selling directly to hotels and restaurants.
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By GlobalData“[This] is retail by the back door,” Shanghvi said. “We have been monitoring Metro since it started its work in 2004 and somehow it has circumvented the rules.”
Three years ago, FAM filed a public interest litigation – or PIL – against Metro in a court in New Delhi, alleging that the German group had violated its cash-and-carry licence. Shanghvi said the lawsuit had reached India’s Supreme Court but there was no timetable as yet for a hearing.
A second lobby group, FDI Watch, is also opposed to direct foreign investment into India’s retail sector. Dharmendra Kumar, the group’s director, agreed that cash-and-carry outlets are a “back door” into India’s retail sector.
Kumar questioned whether the entry of the world’s largest retail companies into India would benefit the country’s economy and boost local employment. He told just-food: “The model of malls and hypermarkets is outdated even in Western countries; they do not sell [products] cheaply and do not guarantee better prices for producers.”
The world’s largest retailers see India as a potential source of future growth. India’s retail market is estimated at around US$270bn and is growing at 13% a year, numbers that have caught the attention of retail giants including Metro, South Africa’s Shoprite and US giant Wal-Mart.
Officials at Metro in India could not be reached for immediate comment.
