To ensure orderly growth of malls in cities while protecting the interests of mom-and-pop shops and organised retailers, the government is planning to set up a retail sector regulator. According to a consultation paper floated by the department of consumer affairs, there would be a two-tier regulatory structure ? at the central and state levels ? on the lines of the electricity sector.
This is because development of malls and other retail outlets fall under the jurisdiction of state governments with clearances mandatory from local municipal authorities. The department has sent the consultation paper to state governments for comments.
Efforts to set up a retail regulator come at a time when the government has floated a consultation paper on whether 100% foreign direct investment should be allowed in multi-brand retail. Currently, FDI in retail sector is haphazard, lacking in uniformity. While no FDI is allowed in multi-brand retail, it is permitted up to 51% in single brand retail and 100% in cash and carry segment. Multi-brand retail, however, is the most lucrative segment where FDI has been opposed by various political parties on concerns that small grocery shops would be wiped out, leading to mass unemployment.
According officials, the paper proposes that state-level regulators earmark zones in various cities for setting up hyper markets and super markets. This would ensure that there are separate zones for them and local kirana shops. Regulators would also broadly oversee pricing of products so that small retailers do not fall prey to predatory pricing by the bigger ones.
The regulator would also check cornering of real estate space by big retailers to block competition from smaller rivals.
?In effect, most of the work currently being done by local municipal agencies and civic bodies would be transferred to the proposed regulator with some additional mandate,? an official said.
With the entry of Big Retail in India since 2006 when corporates like Reliance Industries and the Aditya Birla group forayed into the sector, the government had mandated economic think tank ICRIER to conduct a study on the impact of organised retail on the unorganised sector. The ICRIER report had concluded that big, organised retail did not pose any direct threat to kirana shops, but the government should make finance easier for them to compete with the former. It was access to credit at cheaper rates which would bring in a level playing field, the ICRIER study had noted. In the last one year, some big chains like Subhiksha and Vishal Retail have crashed, belying fears that such chains would wipe out the kirana stores.
Retail business in India is estimated to grow at 13% from $322 billion in 2006-07 to $590 billion in 2011-12. The unorganised retail sector is expected to grow at about 10% per annum with sales expected to rise from $309 billion in 2006-07 to $496 billion in 2011-12.