Mumbai: They may be on opposites sides of the issue of India opening up its retail sector to large branded player but, retailers, big and small, seem to find common ground on at least two of the recommended policy changes: reducing the number of bureaucratic permits needed for new stores and, supporting and strengthening the Competition Commission’s role in overseeing retail.
Both policy recommendations are part of suggestions presented to the government in March by New Delhi-based think tank Indian Council for Research on International Economic Relations (Icrier), which was asked by the government to study the impact of modern retail on small vendors, farmers and consumers.
As Mint reported on 28 March and earlier in December, Icrier, which hasn’t yet made its findings and recommendations public, has found both sales and profit decline for small stores located close to chain stores. Icrier has now concluded that, within five years or so, this negative impact weakens.
In its presentation, Icrier suggested several other policy measures, including ensuring better access to credit for small retailers, opening so-called cash-and-carry outlets for unorganized retail and farmers.
Icrier suggested that the government should “encourage ‘private codes of conduct’ by organized retail especially with small supplies; move toward nationwide uniform licensing regime (and) simplify licensing/permit regime for organized retail.” Icrier notes that 22-23 clearances are currently required for retailers.
“Private codes of conduct are workable, provided there is a uniformed, independent and legally constituted body to enforce them,” said Andrew Levermore, chief executive officer of Hypercity India Pvt. Ltd. “What will benefit the consumer is the elimination of price controls effected by suppliers. Retailers should be allowed to sell at the lowest price they choose. This will go a long way to halting inflation and giving our consumer a much better deal.”
On the issue of supporting and strengthening the Competition Commission’s role as done in the US, the UK and France, both large and small retailers, including some of the country’s biggest operator of discount stores, Subhiksha Trading Services Ltd, independently agreed the plan was good. It is unclear if Subhiksha was one of the six established modern retailers whose case studies are part of the Icrier report.
Competition commissions overseas can typically look into anything from predatory pricing, where a large retailer prices products below cost to hurt the business of a competitor, to squeezing suppliers on pricing, to ensuring that large retailers keep giant stores in out-of-town locations.
Crucial data: The Icrier presentation to the govt showed sales of small stores being hit in areas where organized retail stores have opened shop.
However, Gibson Vedmani, chief executive of industry body Retailers Association of India, said that with the Competition Act of 2003, the Monopolies and Restrictive Practices Act of 1969 and a host of other Acts, such as the Shops and Establishments Act, there is no need for the Competition Commission to get involved.
Icrier’s policy recommendations also suggest the government “encourage cooperatives and associations of traditional retailers for direct procurement.”
“If the state intervenes at these levels, then it is good,” said Dharamendra Kumar, director for FDI Watch, which opposes foreign and big corporate investment in retail. Improving credit facilities and creating cash and carry stores for small retailers “would create a level playing field for small retailers,” he said.
Retailers welcomed Icrier’s suggestion to have a simplified permits. R. Subramanian, managing director of Subhiksha, which runs a neighbourhood store chain and a mobile store chain, says they have to apply and renew their licences for each property separately.
“All this is a nightmare for us and if the government’s intention is to help, we welcome it,” he said
The Icrier report also estimates that while organized retailers had grown by 20% between 2004-2007, the unorganized retail had grown by 11% per annum in the same period. It predicts organized retail will grow at 45% per annum during 2012-17, while unorganized retail will only grow by 10%.
“The small entrepreneur is a powerful force and we should enable that,” said Damodar Mall, chief executive of innovation and incubation at the Future Group, whose flagship, Pantaloon Retail India Ltd is India’s largest listed retailer. “On the customer end, we can all learn from the small retailer. I don’t think we should worry about teaching them those skills.”