State needs to frame inclusive policy for retail sector

Times of India, November 19, 2012

The government of Rajasthan needs to put in place an inclusive retail regulatory regime that would not only protect traditional retailers, farmers and small and medium entreprises, but also provide benefits to the society and economy at various levels, said CUTS International in its memorandum submitted recently to chief minister Ashok Gehlot.

Rajasthan is one of the 10 states which decided to implement the new FDI policy on retail that allows 51% foreign direct investment (FDI) in multi-brand and 100% in single brand retail.

In the recommendations for regulatory initiatives to boost organized retail in the state, the consumer protection body has outlined policy options that the government should take to create an investment attractive climate and regulatory atmosphere conducive to inclusive growth.

Besides putting in place a simplified approval process and a single-window clearance system to fast-track retail projects, the government should also consider establishing a platform where retailers can directly meet the farmers, it said.

“Due to the presence of rent-seeking agricultural produce marketing committee (APMC) officials and their middlemen, retailers often fail to have direct access to farmers. Such a platform will help in addressing the problem faced by the retailers. Moreover, the APMC Act needs to be repealed,” said Pradeep S Mehta, secretary general, Cuts International.

The proposals also focus on the need for a proper policy on licences, which should be auctioned to avoid any kind of malpractices. The guidelines should contain provisions where violations of licence norms could result in penalties, the organization said in the policy options note.

Mehta said that the establishment of a state retail regulatory body will play a critical role in overseeing the functions of the modern retailers, constrains faced by them in areas like procurement of supplies, taxation structure and infrastructure needs etc.

The proposals laid stress that the government policies should support the development of supermarket but at the same time liberalization should be adopted in a step-wise procedure for the parallel growth of traditional retailers.

Citing global experiences, the organization said that in densely populated countries of Europe and Japan, small-store formats thrive and flourish in the face of competition from big-box retail. Introduction of foreign competition forced manufacturers to cut costs in their supply chains and small stores became more efficient. In Indonesia and Brazil where the retail sector has been opened to FDI, 50-70% of trade in groceries, fruits and vegetables still takes place through traditional small stores, it added.

Referring to Chinese experience, Mehta said since the liberalization of retail sector in 1992, the number of small outlets equivalent to kiranas have increased to 1.9 million to over 2.5 million and employment in both wholesale and retail sectors has nearly doubled from 28 to 54 million in less than a decade.

The recommendation drew on many successful models across the world including countries like Japan, Argentina and Spain.

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