Thiruvanathapuram: Kerala, a Marxist-ruled state, on Thursday said it would slap a 10% surcharge on the profits of retail giants to discourage them from opening more outlets.
The state’s communist government, known for taking on multinationals such as Microsoft Corp. and Coca-Cola Co., announced the tax in its annual budget.
“We have shown a red light by imposing a surcharge tax” on the net profits of big retail companies, state food minister C. Diwakaran told the state assembly.
The move was the latest salvo by the Kerala government against plans by domestic conglomerates to operate chain stores in the palm-fringed coastal region, one of the country’s main tourist destinations.
The decision underlined obstacles facing big retailers in modernizing India’s small shopkeeper landscape of 15 million family-run outlets, which fear being forced out of business by lower-priced, plastic-wrapped produce.
The announcement came after a demonstration against “big retail” last month by tens of thousands of traders in Thrissur, 300km north of the state capital Thiruvananthapuram.
A host of major Indian companies, some in tie-ups with international retailers such as US giant Wal-Mart Stores Inc., are seeking to open chain stores, but have met opposition from small store owners across the country.
India’s largest private sector company, Reliance Industries Ltd (RIL), has already opened stores in Kerala and elsewhere, but has been forced to scale back its plans for more retail openings because of the protests.
The Uttar Pradesh government last year ordered the closure of stores run by RIL and another chain after attacks by protesters. Lack of government permits also forced RIL to put store openings on hold in the Marxist-ruled West Bengal.
Bharti Enterprises Ltd, the country’s top mobile phone company, plans to spend $2.5 billion (Rs10,075 crore) by 2015 to set up hypermarkets, supermarkets and other stores across India after reaching a deal with Wal-Mart.
An economy growing by nearly 9% has created greater affluence in the country of 1.1 billion people and companies are seeking to tap India’s middle class in what commentators have dubbed the “great retail gold rush”.