While all eyes are on the Union Budget for any move to allow foreign direct investment (FDI) in multi-brand retail, many households are already enjoying the benefits of foreign retail chains.
Shoppers without valid business licences say they buy goods from these wholesale outlets, called cash-and-carry outlets, run by foreign retail chains. These are allowed to have up to 100 per cent FDI but cannot sell directly to consumers. They can sell only to those with specified business licences.
These companies, however, denied that anybody except legitimate licensees were being allowed to enter their stores.
Company officials, not wanting to be quoted on record, said 100 per cent compliance was not possible at times. They said checks were in place and steps like cancellation of membership cards had been taken when violations were detected.
In the past, trade associations have protested against non-businesses consumers buying from these stores. The government hasn’t taken much notice and has indicated that it’s a matter of time before multi-brand retail is opened to FDI. Commerce Minister Anand Sharma recently said the government was in advanced talks for allowing FDI in retail. Also, the Economic Survey, which is seen as a pointer to the Budget, said FDI should be allowed in multi-brand retail but in phases, starting with the metros.
P Venkata Narayana, who runs a beauty salon near Hyderabad, says his business has changed after the entry of Metro, a Germany-headquartered cash-and-carry major. He says he now has to travel far less to buy products for his salon. Although he could have got a licence, he chose to use his relative’s membership card to buy goods at a discount. Narayana said he did not face any problem at the store. “Though my outlet is registered as a proprietorship firm, I didn’t know much about the enrolment process,” he said.
Ketan and his father shopped at the Bharti-WalMart Best Price Modern Wholesale store during their recent trip to Bhopal. Ketan was happy as he got to buy goods at a heavy discount. They used the licence of Ketan’s cousin, Palak. “We got in easily,” he says. Next, Palak got similar cards for Ketan too. According to another shopper there, “buyers have to give a declaration that they will use the goods purchased, worth not less than Rs 500, for retail only.” But nobody can check what one is buying for, he says.
At the Carrefour store in New Delhi, the only one that the French retail major has opened in India, we spoke to a couple of customers who claimed they were using others’ cards. They did not want to be named.
PJ Vara Kumar is a frequent customer to Metro Cash & Carry, Hyderabad. He does not have a membership card. “A kirana store-owner near my house at Chintal lends me his card,” Kumar says.
A Kolkata-based kirana shop owner said, “One has to just accompany someone who has a card.” The company says a person is allowed to accompany the cardholder. At the Bharti-WalMart Best Price Modern Wholesale store at Zirakpur near Chandigarh, a few customers, who did not want to be named, said they were shopping for their domestic needs. Some said they were shopping with add-on cards. A primary member of the retailer can get up to two add-on cards.
While Carrefour did not respond to the detailed questionnaire sent by Business Standard a week ago, Bharti-WalMart and Metro Cash & Carry have given detailed answers.
Whether a person can use a relative’s or a friend’s licence/membership card to purchase goods at Metro Cash & Carry, the company spokesperson said, “The customer registration card is only for registered cardholders.” If there was a plan to revise the rules, he said, “There is no plan to revise the rules of purchase.”
The official said Metro Cash & Carry sold only to registered business customers based on their business licences. “There is a list of licences that are needed to register as a business customer. This is according to the guidelines. An indicative list, this includes central/sales tax registration, VAT registration, trade licence, excise registration, smallscale industry registration, shop and commercial establishment registration, liquor licence, drug licence, factory registration, among others.” The procedure involves verification of the licence and a photo identification of the person concerned. Once these papers are verified, a customer registration card is issued. This customer registration card has the name of the person, the business entity and the photograph of the person.
A Bharti WalMart spokesperson said the company had taken a number of steps to prevent misuse of the membership card. “After registration, a member is issued a magnetic plastic non-transferable photo identity card, which is person-specific. The member must come personally to present the card at the main entry. The entry is permitted only after a visual check.”
The Bharti WalMart official said there were two add-on cards which were non-transferable and issued to the person nominated by the primary member. But, the invoices were generated in the name of the member, he said. “The nominated persons are also checked for visual identification as per the photograph on the add-on cards.” He added that the minimum purchase value of Rs 500 was a deterrent against misuse.
On whether the rules for shopping could be revisited, the official said they were engaged in business-to-business wholesale trading operations as allowed under Indian laws. “We incorporated stringent rules for businesses to become members of our stores even before the FDI policy stated these criteria on April 1, 2010, which includes more than 30 types of government-approved licences and business documents.”
