Kochi: The Kerala government’s proposed 10% surcharge on the profits of big retail chains, paraded as a hurdle to the entry of the giants, has run into trouble, with members of its own ruling communist alliance condemning the plan as —actually—an endorsement of organized retail.
Kerala minister for food and civil supplies C. Divakaran said the proposal will be opposed at all levels and claimed the “surcharge is an incentive to retailers.”
Organized retail chains have faced violent campaigns against them in the state, with a number of these protests led by constituents of the ruling Left Democratic Front.
Reacting to the criticism, state finance minister Thomas Isaac said: “There is nothing like legitimizing this. It (organized retail) is there and we have decided to tax them. It is true that there has been stiff opposition to their entry into the state.
Tough going: C. Divakaran, minister for food and civil supplies.
But, the law does not prevent them from setting up shops and imposition of additional levies on these big chains has been demanded by almost all sections of society.”
Local self-government minister Paloli Mohammed Kutty admitted that the law does not prevent big retailers from operating in the state, but said his party would try to find ways to oppose their entry.
If local self-governments, such as panchayats, municipalities or corporations, withhold licences to the retail chains, they approach the tribunal for local self-government institutions and get the orders, he said.
Indeed, the tribunals often rule in favour of the retailers, a local self-government department official said. For instance, in a case where Reliance Retail moved against the municipality in Irinjalakuda in Thrissur, the tribunal said in its ruling in August 2007 that the entry of such chains would protect public interest as it would lead to greater competition.
Isaac made the proposal in his state budget for 2008-09, arguing that the surcharge would fetch the exchequer Rs2 crore each year. Reliance Retail of Reliance Industries Ltd, Fab Mall of Trinethra Super Retail Ltd and Big Bazaar of Pantaloon Retail (India) Ltd together have about 70 stores across the state.
Kerala and West Bengal, both ruled by communist governments, and Uttar Pradesh, have seen protests against the retail chains, mostly led by political parties and activists, on fears that these giants would step on neighbourhood stores.
The Union government has commissioned Icrier, a New Delhi think tank, to conduct a study on the impact of organized retail on small store owners.
But the think tank is yet to release the report—various deadlines announced by ministers have come and gone. Mint, which reported the findings of the study, had pointed out that the survey showed the growth of organized retail had hurt small store owners.
As for Kerala’s surcharge decision, “it comes hardly a fortnight after traders in Kerala downed shutters and took a pledge to oust big retail chains out of the state and do all to prevent their entry,” noted an executive of a retail chain, who did not want to be identified but welcomed the decision.