Govt moots retail sector watchdog

Govt moots retail sector watchdog

Govt moots retail sector watchdog
http://www.business-standard.com/india/news/govt-moots-retail-sector-watchdog/399959/

The Centre is mulling over creation of an independent body to regulate
the country’s vast retail sector. The retail regulatory authority would
ensure a level playing field for indigenous retail traders if the
government opens the sector to more foreign participation. The Ministry
of Consumer Affairs and Food has convened a meeting on July 8 in Delhi
to discuss this and other proposals and chart a comprehensive plan for
the sector, according to the agenda paper of the meeting.

The move is being seen as a precursor to opening the retail sector.

At present, India does not allow foreign investment in multi-brand
retail, while up to 51 per cent is allowed in single brand retail.
Foreign direct investment (FDI) of up to 100 per cent is allowed in
wholesale cash-and-carry trade. The ministry has invited, among others,
representatives from the Department of Industrial Policy and Promotion
for the July meeting.

The meeting is also likely to take up for discussion a proposal to enact
a National Shopping Mall Regulation Act.

The need for a model legislation has been felt to prevent large domestic
retailers from displacing neighbourhood kirana stores, a sensitive issue
in India, where the retail market has been dominated by unorganised
retailers. It is proposed that environmental and urban laws be strictly
enforced to limit multiplication of malls and corporate retailers in a
particular area. It is also suggested that licences for opening shopping
malls be linked to the density of population and the stage of existing
competition in retail in the zone.

The meeting will also discuss whether there is a need to set up a
national commission to study the problems of the retail sector.

The Department of Consumer Affairs has suggested a two-stage discussion
on the retail sector, one at the level of the state governments on the
recommendations made by the Parliamentary Standing Committee on
Commerce. At another level, the department has proposed to hold talks
with academicians, non-governmental organisation, and others on opening
the retail sector.

With pressure building on the government to further open the sector for
foreign investment, the commerce and industry ministry had prepared a
concept note a few months ago to allow up to 51 per cent FDI in
multi-brand retail other than primary goods (foods, groceries and
vegetables), but with some stiff riders.

The note was prepared to generate a debate among key government
ministries which are involved in a re-look of the retail sector as well
as the FDI policy.

The commerce ministry was also keen to permit FDI in retail of foodgrain
as well as other essential commodities to create a parallel network to
the public distribution system, which has become notorious for its leakages.

The core of the plan is to allow FDI in retail, provided the retail
stores are located in cities with a minimum population of one million.
The move aims to protect vendors in small cities.

The ministry had also suggested minimum capitalisation norms for
companies investing in retail, in addition to a minimum built-up area
rule for their retail outlets.

Since 2006, when FDI was partially allowed in retail, the government has
approved 54 FDI proposals in the sector and the country has received an
inflow of Rs 822.70 crore.

With 15 million outlets, India’s retail sector is highly fragmented.
Only 4 per cent of the outlets are bigger than 500 square feet in area
and the remaining 96 per cent are in the unorgainsed sector.

There have been fears that with a liberal FDI regime, the big global
retailers would go in for predatory pricing, virtually destroying the
small retailers. That is the reason why the government has treaded
cautiously in this sector.

Companies such as Wal-Mart, Tesco and Carrefour, some of whom are
already in cash-and-carry business, have been trying to convince the
government to allow them access to India’s retail sector.

However, there is a growing view that FDI, in addition to bringing in
large investments, would also help in reducing costs, create new
employment opportunities, and improve conditions for small manufacturers
and retailers. And, the advantage of proximity to the consumer and
familiarity would ensure that small retailers co-exist with the big boys.