The Confederation of All India Traders (CAIT) filed a complaint with the Commerce and Industry Ministry against LOTS Wholesale Solution, a wholly owned subsidiary of Siam Makro Public Company Ltd, for what it called “flagrant violations of the FDI policy” for cash and carry trading. 

It also demanded a penalty of three times the turnover of its last fiscal on LOTS for undertaking B2C retail trade in the garb of B2B business and violating FDI norms. Siam is part of Thailand’s leading conglomerate, Charoen Pokphand Group.

In a letter addressed to Commerce and Industry minister Piyush Goyal last month, the traders’ association alleged that LOTS started its B2B operations in India in 2017. Still, it has violated provisions of the FDI policy for cash and carry trading from the very beginning by engaging in B2C retail trade/multi-brand retail trading and selling directly to customers for their consumption.

The same is prohibited for foreign entities like LOTS, the letter added. “We request you to pass strict directions to prohibit LOTS from carrying on MRBT/B2C retail trade in the garb of B2B wholesale trade. We would also like to suggest a penalty to the tune of ₹3,000 crore be imposed on LOTS, which is three times its investment in India,” the letter said.

FDI policy

“The CAIT says that, per the FDI policy, wholesale trade means the sale of goods to retailers, other wholesalers, industrial, commercial, institutional, or other professional business users and related subordinated service providers. The FDI policy clearly states that the yardstick to determine whether the sale is wholesale or not is the type of customer to whom the sale is made,” the letter stated.

The letter further alleged that LOTS has been violating FDI norms by selling goods to walk-in customers who do not hold trade licenses under Shops & Establishments Act or permits to undertake retail trade or are authorized to engage in commercial activity.

“Such a violation is carried out by LOTS by issuing four registration cards/ add-on cards/supplementary cards along with the primary registered cards to people not related to the business activities prescribed in the FDI policy. LOTS encourages B2C customers to use this route to make purchases while knowing that the cardholder is not a bonafide purchaser. LOTS is encouraging such behaviour to enhance its sales,” the letter stated.

The CAIT’s communication to the ministry added that LOTS’ business practice of issuing add-on/supplementary cards to non-qualified customers, is sufficient ground to hold them in violation of the FDI policy/FEMA and take punitive action against them.

CP Group operates three wholesale stores in India. It has emerged as one of the three final bidders for Metro Cash and Carry’s India business, which operates 31 stores across the country.