American retail giant Walmart and its Indian joint venture partner Bharti Enterprises came under scrutiny today over a public interest suit that alleged violation of multi-brand trade norms. Currently, Foreign Direct Investment (FDI) is not allowed in multi-brand retail.
The Delhi High Court sought replies of the Centre, Bharti-Walmart and Bharti Retail on a plea for a probe against the firms for allegedly carrying out retail trading in the multi-brand sector in violation of India's existing FDI policy. The court issued notices on the basis of the suit filed by environmental activist Vandana Shiva.
It says Bharti-Walmart is illegally carrying out multi-brand retail trade despite being permitted only to carry out wholesale cash-and-carry, or wholesale trade in the country.
The PIL said: "This instant case seeks to expose how many established Indian companies are actually fronting for foreign trading companies that have partnered with them for setting up companies in India for the purpose of carrying on trade, so as to give the foreign partner majority control and economic interest in the Indian retail sector, thereby circumventing the FDI prohibition of multi-product trading in the retail sector."
Senior lawyer Pinky Anand, representing Shiva, while speaking to Business Standard, alleged Bharti Walmart was believed to be directly or indirectly carrying out multi-brand retail business in India even as it did not have the permission for it. She further alleged Easyday stores were indirectly being run by the joint venture between Walmart and Bharti.
“We have neither seen the petition nor received any notice from any court,” a Bharti -almart spokesperson said in a statement. A spokesperson of the Bharti group, which runs Easy Day stores, said: “We haven’t received any such notice and would therefore be unable to offer any comment.”
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Bharti-Walmart is a 50-50 joint venture formed in 2007, and it operates cash-and-carry, or wholesale outlets in India. Walmart is waiting to open supermarket stores across India once FDI rules of the country permit multi-brand retailing.
Currently, Bharti-Walmart runs 17 cash-and-carry stores in India, where 100 per cent FDI is permitted.
Bharti Retail, a wholly-owned subsidiary of Bharti Enterprises, operates 187 neighbourhood stores under the Easyday brand.
Walmart provides back-end support for these stores, as that is permitted under the FDI guidelines. While the first Best Price Modern Wholesale, Bharti-Walmart cash-and-carry store, was opened in 2009, Easyday made its debut in 2008.
It is learnt that once FDI is allowed in multi-brand retail, the Easyday stores may be run by Bharti-Walmart.
The petition, referring to a response received under the Right to Information Act, said the Department of Industrial Policy and Promotion had not granted any licence to Bharti or Walmart or any other company to set up Easyday stores in India.
“Union of India permitted FDI only in the cash-and-carry wholesale sector in India, without implementing appropriate checks to ensure that such companies are not able to intrude the multi brand retail sector," it said.