The government is likely to set up an independent regulatory body to check anti-competitive practices in the retail sector, a move that coincides with the imminent entry of cash-rich multinational corporations into India’s fast-growing multi-brand retail trade. Bracing for a stormy winter session of Parliament over its recent decision to allow 51% foreign direct investment (FDI) in multi-brand retail, the government reckons that the plan for a pan-India retail regulator could be used as a key bargaining tool to silence the Opposition.
According to officials, the Department of Industrial Policy and Promotion (DIPP) has prepared a note on this where it explains how the regulator can help in the rollout of the retail FDI policy and prevent the reform initiative from becoming unpopular. The proposed regulator, the sources said, would prevent any eventuality of retail biggies eating into businesses of small retailers through anti-competitive practices like predatory pricing.
The recent news about investigations into alleged corruption and bribery by the world’s largest retailer Walmart has also spurred the government’s move.
Sources said that the proposal to create the retail regulator also came up for discussion during the Cabinet meeting on allowing FDI into the sector. The DIPP, though convinced over the need to have a regulator, is understood to have indicated that this could be considered at the post-implementation stage. The sources also confirmed that the matter was discussed at various meetings after which the Cabinet cleared the new FDI policy.
The proposal has also got support from the ministry of labour, which had earlier made a strong case that FDI in the sector should be conditional on agreement over having a suitable regulatory mechanism. Apart from predatory pricing, the labour ministry also wants the regulator to periodically review the status of employment in the sector following infusion of FDI and report it to the ministry for guidance.
The initial thinking is that the proposed regulator would just look into the affairs of multi-brand retail trade with FDI component. It could look into the entire spectrum of multi-brand retail trade at a later stage.
The mandate of the regulator at the Centre would be limited as various other functions of the retailers would be governed by states that would grant licences to them under the Shops and Establishment Act.
While the government feels that the regulator could balance multi-brand rollout, analysts say that India would be the first nation to have a