December 6th, 2012
NEW DELHI: The government plans to revolutionise the retail sector to make India a global shopping hub, with new labour laws to support 24-hour business, limiting reckless multiplication of malls to prevent urban chaos, and strong measures to ensure small shopkeepers also thrive in the transformation.
The consumer affairs ministry also wants to allow farmers to directly sell their produce to retailers, and adopt a uniform countrywide licensing regime to accelerate retail growth. The issue of modernising retail to ensure that benefits reach every section of society was debated in the cabinet when it approved FDI in multi-brand retail.
To facilitate such far-reaching changes, the government plans to set up a committee of central ministers of agriculture, commerce, corporate affairs, environment, finance, food, labour, railways, urban development and infrastructure ministries, official sources said.
Another panel of secretaries, representatives from IIMs, industry bodies, consumer activists and trader associations will also study the retailing sector. The move is expected to bring on board small traders and shopkeepers, who are apprehensive about loss of business if large international companies set up shop in India.
Traders welcomed the move. “This is a fantastic method to take things forward… It will smoothen out trade at pan-India level,” said Kumar Rajagopalan, head of Retailers Association of India, which has 400 modern retailers as members.
The government panel will discuss ways to modernise labour laws and amend them to be more supportive of retail requirements pushing for 24x7x365 work environment. It will also look at means to reduce multiple licensing requirements and offer a single-window facility for retail operations throughout the country.
Safeguards for Small Stores
“It will also consider establishing a national commission to study the problems of retail sector,” said a consumer affairs ministry official.
Madan Sabnavis, chief economist at CARE Ratings, said the government has safeguarded interests of small kirana shopowners and manufacturers in its notification on FDI in retail by ensuring 30% outsourcing from local small and medium industries. “Walmart, if it comes, can’t open 30-40 stores at one location even in cities like Delhi and Mumbai.
It gives enough space for small stores to operate, which can thrive on their doorstep services. The government should modernise APMC Act to create direct linkage of farmers with retailers,” he said.
However, Dharmendra Kumar, director, India FDI Watch, an NGO that has opposed the entry of foreign retailers, said the government should have sufficient regulatory framework to control the rampage of foreign retailers entering the Indian space. “There is no cap on the number of stores a big retailer can open in a city. Nor there is any specification on size of the store. In absence of such regulations, these supermarts can open in any location interfering with the operations of small stores,” he said.
The panel, however, is looking at putting some safeguards in place to help small stores. “It will work out a legal and regulatory mechanism to ensure that large retailers don’t displace small ones and even misuse their higher buying power to create a one-sided price war besides setting up in-built policy to relocate or reemploy people who are affected due to opening up of big malls in the vicinity of their shops,” another official of consumer affairs ministry said. The committee will also consider recommendations of the parliamentary standing committee on retail sector, and suggestions of the study on organised retail by the Indian Council for Research on International Economic Relations (ICRIER).
ICRIER had endorsed the entry of branded chains in retail sector, saying the sector is likely to grow at 13% till 2011-12 with organised retail growing at 45-50% in this period and unorganised retail at about 10%.
A recent study by ICRIER on facilitating trade has argued that pan-India supply chains cannot be established unless GST is implemented. Arpita Mukherjee, professor, ICRIER, said retailers face multiple regulations that vary across states and this creates hurdles for smooth functioning.
“For example, the central government can have a model Shops and Establishment Act that states can implement. This Act should have provisions for modern retail to operate such as possibilities to employ on a rotational basis and flexibilities in shop opening timings. If these reforms are implemented within two years, it will lead to investment in backend and help to reduce wastage,” she said.
