Fresh-produce wholesalers here are looking to use a decade-old government regulation to try and thwart Reliance Fresh, a chain of vegetable and fruit stores promoted by Reliance Industries Ltd.
The effort is significant because there has been a lot of focus on organized retail vs unorganized retail in recent months and Chennai is India’s fifth-largest wholesale market for vegetables and fruits.
The 1996 regulation granted protection to wholesalers against direct procurement by retailers as a compromise for wholesalers being moved from multiple locations in the city to Koyambedu. The legislation prevents retailers from procuring fresh produce directly from farmers and bypassing the wholesale traders, who were concerned they would lose business because they were moving to a single location.
Sensing competition from Reliance Fresh, wholesale traders are urging the government to prevent the chain from buying directly from farmers because, they allege, it violates provisions of Tamil Nadu’s Specific Commodities Act. The wholesalers association notes that other retail chains such as Kovai Pazhamudhir Nilayam are still buying from the wholesale market.
“What’s the meaning of the Act if Reliance is allowed to procure directly?” asked V.R. Soundarajan, a wholesale trader of onions and president of Koyambedu Vegetable Market. “We will demand that the government take action against this blatant violation.”
The Koyambedu wholesale market has an 80% occupancy level with around 3,000 stores selling fruits, vegetables and flowers. The wholesale traders and small vendors are calling for a one-day statewide closure of their shops to protest against the entry of organized retailing. Some 30 different trader associations with around 200,000 members are expected to participate in the closure, said Soundarajan.
The president of Reliance’s Agri And Food Supply Chain, Sanjeev Asthana, said the company does buy directly from farmers in Tamil Nadu but said it has a license to do so.
One of Reliance’s key consumer propositions has been that it will procure fresh produce from farmers, and in many cases has given out cultivation contracts to farmers to procure fresh produce directly. The company estimates that 40% of fruit and vegetables produced in India is wasted from improper storage and handling, and wants to invest in infrastructure to prevent such wastage.
Officials of Chennai Metropolitan Development Authority, the apex planning body for the city, and Market Management Committee of Koyambedu Market confirmed that traders have raised this issue with them and that the authority is planning to hold a meeting with the corporation and police officials soon to see whether there is any such activity which violates the Act.
People at the metropolitan authority, who didn’t want to be named because of the ongoing dispute, said there cannot be direct procurement from farmers under the Specific Commodities Act and only trucks from Koyambedu market are allowed inside the city. Once the traders file a formal complaint, the authority may form a committee to investigate, they said. Wholesale traders claim that the entry of Reliance Fresh has halved their business because their customers, typically small street-side vendors, are losing customers to Reliance Fresh.
Reliance is planning to spend about Rs25,000 crore by 2011 to open a raft of stores from groceries to hypermarkets. It’s most-recent Reliance Fresh store was opened in Bangalore.
Rasul Bailay contributed to this story.