Reliance further cuts its troubled retail plans

Reuters
Posted: Thursday, Oct 04, 2007 at 0000 hrs IST
Updated: Thursday, Oct 04, 2007 at 0910 hrs IST

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Mumbai, October 4:: Reliance Industries Ltd has ended the services of about 400 franchisees for its planned retail operations in West Bengal and has shelved a rollout in Orissa because of protests from small traders.

The moves come after Reliance Retail, a subsidiary of the country’s biggest listed firm, last month laid off 1,000 staff in Uttar Pradesh after the state shut 10 Reliance Fresh supermarkets, following protests and attacks by small traders.

Reliance, which is spending more than $5.5 billion in its retail venture, had planned to open about 500 Reliance Fresh supermarkets in communist-ruled West Bengal and about 150 in Orissa, said a senior company official who asked not to be named.

There have also been protests in other, mostly northern and eastern states, while Kerala is drafting a law to restrict Reliance to protect jobs.

"We are very clear: if a particular state cannot guarantee protection, we will not go and open stores," said the official.

"But the central government appears to be keen on the industry's growth, so we are optimistic that these issues will be sorted out soon," the official said.

Modern retail faces political obstacles because of fears millions of small shopkeepers could lose their jobs in the fragmented but fast-growing industry that is forecast to double in size by 2015 from an estimated $350 billion.

India limits foreign multiple-brand retailers to wholesale or franchise and licence operations. Talk of easing foreign investment rules have cooled in recent months, prompting Tesco Plc and Carrefour to shelve their India plans.

Large Indian firms including the Tata Group, the Aditya Birla group, RPG Group and Pantaloon Retail India Ltd have been stepping up investments to tap growing consumer spends.

But traders and small shopkeepers have vowed to pressure state governments to restrict or keep out large Indian and foreign retailers, and for a repeal of a law that allows retailers in some states to source produce directly from farmers.

A nationwide protest in August against the entry of retail giant Wal-Mart Stores Inc drew only a few hundred traders and shopkeepers, but there have been several instances of damage to stores, and more protests are on the way.

An organisation of traders, hawkers and farmers in Maharashtra plans a rally on October 10 for a slew of demands including cancelling wholesale licences, including one granted to Wal-Mart Stores for a venture with Bharti Enterprises.

"Where will the small traders and shop keepers go?" said Dharmendra Kumar, director of India FDI Watch, part of a national joint action committee that is backing the protests.

The committee estimates about 40 million jobs will be lost, against the 2 million that modern retail promises to create.

"Our fight is with the government, not the companies, but sometimes the anger is so much that there are attacks on stores," Kumar said in response to a question on whether the protests would be peaceful.