Walmart’s decision to end its partnership with Bharti Enterprises — on a proposed multi-brand retail venture and an existing ‘cash-and-carry’ business — does not add up to a pullout from India. The break up has ended on terms that will see Walmart buy out Bharti in their equal joint venture and thereby acquire full control of the wholesale or cash-and-carry stores under it. While this signals an intention to stay on, and even grow the current business, it would appear that Walmart’s ambitious foray into the multi-brand retail space has, however, been put on hold. This is definitely a setback for the Centre which, in September 2012, had allowed global supermarket chains to own up to 51 per cent in multi-brand retail ventures. Walmart, at that time, had described Bharti as its “natural partner” and was expected to own 51 per cent in the latter’s up-and-running retail operation.
The announcement that the two are parting ways takes us back to the situation that prevailed before September 2012. Foreign retailers were even then permitted to own 100 per cent in the cash-and-carry segment catering to shopkeepers, restaurants and other institutional consumers. The absence of restrictions in this business — such as having to enlist local partners and sourcing a prescribed minimum value of products from small and medium enterprises (SME) — means they will continue to find it relatively attractive. Walmart opted for a 50:50 cash-and-carry venture with Bharti only because it saw this as a springboard for a future multi-brand retail partnership, once FDI into the sector was permitted. The discontinuation of the partnership is related to the stifling operational restrictions in the retail space. From Walmart’s standpoint, if retail wasn’t heading anywhere, why not focus on wholesale cash-and-carry and own 100 per cent in it?
The separation is a signal for the Government, which professes to be interested in attracting FDI in retail, to ask itself some pointed questions. If the entry of global retailers is seen to stimulate investments in supply-chain infrastructure, besides cutting out the layers of intermediaries between producers and consumers, why have regulations on ownership and sourcing? Also, when ‘retail’ itself has been opened up, is there any sense in having separate rules for stores selling to institutional buyers and ordinary consumers? If a foreign player like Walmart can own a 51 per cent controlling interest, why draw the line at this? Alternatively, if 100 per cent ownership and no compulsory SME procurement norms are all right for cash-and-carry, what is the logic for not extending this to retail? Our babus in Udyog Bhawan revel in making fine distinctions between retail and cash-and-carry, single-brand and multi-brand retail, front-end and back-end. The truth is such distinctions have lost their relevance after September 2012 and it is high time the Centre realises this.