Govt mulls retail regulator to level playing field

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The government is exploring the possibility of setting up a new national authority to regulate the $328-billion retail sector. The proposed regulator will monitor retail trade and act upon complaints of illegal practices in areas ranging from procurement to land acquisition, marketing and servicing.

According to government officials, the proposal is at an initial stage and needs to be discussed with various ministries before being taken up by the Cabinet. The officials admit it is in response to strong political opposition, including from Left parties, to organised retail in general and FDI in particular.

The regulator is likely to be either under the purview of the ministry of commerce & industry or the department of consumer affairs, the details of which are being worked out. If the government does set up a regulator, India could become the only country among its peers to have one for the retail sector.

“It is imperative to look at the sector from a consumer and producer perspective. The law on consumer protection at present provides a redress mechanism that not only allows handing down preventive orders and compensation. But nobody looks specifically at the regulatory aspect of the sector,” an official told FE.

The regulator will look into monopsonistic practices (a large buyer determining the price and standards at which small sellers supply to him), predatory behaviour and abusive dominance. The officials said the regulator would also look into real estate cornering by large retail chains to restrict competitor access and complaints of muscling out smaller retailers by price undercutting.

“The livelihood of small farmers and other producers is the issue here. Once a small producer is hooked to a large retail chain, he can then be pushed around. A regulator can help prevent such practices. It can then refer such anti-competitive practices to the Competition

Commission of India,” said Pradeep S Mehta, secretary-general of Cuts International.

Analysts also pointed out that the sector was already part regulated by the existing restrictions on FDI. They said the government’s move might have been prompted by political compulsions in the run-up to general elections and agitations against large multinational chains.

However, trade bodies like Ficci believe a regulator is not needed. Certain sections within the government like the Planning Commission also do not favour a regulator.