Wednesday 25 July 2007

Kerala proposes ban on organised retail

In a move that should prove popular with traders, trade unions and a sizeable section of people who oppose the opening up of the retail sector, Kerala could become the first state in India to introduce legislation banning the involvement of large businesses in retailing

The south Indian state of Kerala is set to ban all organised retailing, including those stores run by Indian companies, with the state government proposing to introduce legislation to this effect. The move is the latest development in a controversy surrounding the involvement of large businesses in food retailing in India that is expected to adversely affect the livelihoods of millions of small vendors and kirana shops.
Kerala’s leftist government says opening up the retail sector will harm consumers in the state and also affect the strong Public Distribution System (PDS) network. C Divakaran, Kerala’s Food and Civil Supplies Minister, said: “The mood of the people is against the entrance of Reliance in the retail sector.”
How exactly Kerala will implement a law banning food retailing is something that remains unclear, as food supply is on the concurrent list in India’s Constitution. This means that both central and state governments share power on the issue. “We are going to add some powers to the state government to restrict or prevent these monopoly houses in the state-level retail sector,” said Divakaran.
One of India’s largest business houses, Reliance Industries Limited, has already received clearance for six of its 70 planned retail outlets in the state. But permission for the outlets, in Kochi, will stand revoked if the law is passed, says the Kerala government. “The government has requested the Kochi Municipal Corporation to cancel the licences. And, again, our Cabinet is going to take a decision not to give licences to monopolies. We are going to discuss (the matter) and take a decision,” the minister added.
Instead around 35,000 PDS shops will be opened, to firm up the government’s presence in the retail sector.
The country’s retail business is growing at nearly 6% per annum, mostly powered by Indian players. Besides Reliance, other large businesses in the burgeoning food retail business include Hindustan Lever, the Birla Group, Spencer’s Daily and Big Bazaar.
But this growth has been met with rising discontent. Reliance Fresh outlets selling vegetables have been vandalised in Indore, Ranchi and Delhi.
Around 21 million Indians are involved in the retail trade, the second largest number after agriculture. Traders, trade unions and a sizeable section of people oppose the opening up of the retail sector.
If the move is successful, Kerala will become the first Indian state to have such a ban in place. Other states are likely to follow suit.
This puts India’s central government on the back foot as it has been welcoming retail players, both international and local. “As far as the allies are concerned, West Bengal has invited others. I tell you there is something wrong with the Kerala government,” says a perplexed Minister for Food Processing, Subodh Kant Sahay.

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