The Hindu Business Line : Panel moots ‘blanket ban’ on big ticket investment in retail

New Delhi, June 9 The Parliament Standing Committee on Commerce recommended a “blanket ban” on domestic corporate heavyweights and foreign retailers from entering into retail trade in areas such as grocery, fruits and vegetables.

It also sought restrictions on the opening of large malls by them for selling other consumer products.

In its report on the ‘Foreign and Domestic Investment in Retail Sector’, tabled in Parliament, the committee said, “a reservation policy should be adopted for indigenous small and medium retailers and financial assistance schemes should be given for undertaking expansion and modernisation”.

“The smaller retailers have been big providers for employment in this country. In the Indian economy, these ‘mom n pop shops [small retailers]’ are very important,” said Dr Murli Manohar Joshi, Chairman of the Committee, while speaking to Business Line.

Single brand provision

The committee observed that single brand provision is not adhered to and shops in malls sell other branded products along with the brand for which they have got permission.

It added that allowing cash and carry wholesale is nothing but a backdoor entry for foreign companies into retailing. These companies sell for personal consumption when they have permission to only sell for business purposes.

The opening up of foreign direct investment (FDI) in retail trade by allowing single brand foreign firms in India will result in unemployment within indigenous retail traders, said the report.

Consumers’ welfare would be sidelined, as a “predatory pricing policy” by big retail giants would initially mean low prices.

However, after wiping out local competition, they would be able to achieve a monopolistic position and dictate prices, the report said.

‘Protect small players’

The report also recommended the setting up of a ‘Retail Regulatory Authority’ and a ‘National Commission’, to protect the interests of the unorganised retail sector and study the effects of FDI on it.

It further added that a ‘National Shopping Mall Regulation Act’ should also be enacted to regulate the entire retail sector.

“Only after complete regulation should even Indian capital be allowed. Environmental conditions, location, parking and the size of the mall – all have to be taken into account,” said Dr Joshi.

The committee added that before opening up the sector to big ticket foreign and domestic investments, the Government should ensure a level playing field for smaller retailers.

They should also be entitled to better deals in institutional credit. “Credit should be provided at lower rates to small retailers by public sector banks for expansion and modernisation,” said the report.

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