MUMBAI, 30 August 2007 — A communist-ruled state in southern India is drafting a law to restrict Reliance, the country’s biggest private company, from opening supermarkets on fears they could hurt small stores, especially in rural areas.
The move by Kerala state is the latest political obstacle for Western-style supermarkets amid fears millions of Indians working in the country’s “mom and pop” stores will lose their jobs as the $350 billion retail industry is modernized.
Last week, the northern state of Uttar Pradesh ordered the closure of 10 Reliance Fresh stores, which are modern air-conditioned supermarkets, after some angry traders and political activists attacked and damaged new outlets. That closure spiraled and Reliance Retail Ltd, a subsidiary of Reliance Industries Ltd., has delayed opening hundreds of supermarkets in northern and eastern India following protests.
“We are studying a draft legislation to restrict Reliance stores because we don’t want them to monopolize and make the common people suffer,” C. Divakaran, Kerala’s minister for Food and Consumer Protection, told Reuters. “We don’t want them in the rural areas.” A spokesman for Reliance Retail declined to comment.
The Kerala government says it wants to protect 14,000 state-run stores, called “ration shops” where essential commodities are sold at a subsidy for the poor. In West Bengal, the communist-led government headed by the Communist party of India-Marxist (CPM) said they would protect Reliance’s stores from violent protests but there were signs of a split in the state’s ruling coalition.
“We will provide protection to Reliance and ensure there is no vandalism in their stores,” Amit Kiran Deb, the state’s chief secretary, told reporters.
Other members of the government were unhappy.
“I fail to understand why they are not standing by the poor traders who sell vegetables in the streets,” said Mortaza Hossain, a leader of the Forward Bloc, the second biggest leftist party, and state minister for agriculture marketing. Local newspapers criticized the left for the impasse.
“The world may be changing fast, but Bengal’s politicians, especially the leftists, would try to cling to their musty, old ideas,” the Telegraph newspaper said yesterday.
India’s retail industry is forecast to double in size by 2015, and Wal-Mart Stores Inc. recently signed a deal with Bharti Enterprises to set up a chain of wholesale outlets.
Access to foreign retailers is hampered by laws restricting multi-brand retailers to cash-and-carry and franchise operations.
Reliance is investing more than $5.5 billion in its retail venture, which will include hypermarkets, supermarkets, discount and department stores.
