POLITICAL sensitivities of the ruling Congress party could well mean that global retail giant Wal-Mart would have one crucial item less on which to draw a roaylty from Bharti’s proposed retail venture: its brand name. The Congress is learnt to have objected to the possibility of Bharti using the Wal-Mart tag for its retail stores, as it this may create an impression that the American giant has slipped past the blockade of FDI in retail. The party’s concern may well be prompted by the fact that by the time the Bharti venture opens its first stores, the general elections will be only a year away.
According to sources, a senior party functionary considered close to Congress President Sonia Gandhi has also asked the government to seek details of the JV and make it public. Bharti, however, hasn’t even finalised the christening of its retail venture! Talking of the group’s retail plans recently, Bharti joint MD Rajan Mittal had said: “We are yet to decide on a name for our stores, which will be based on a pan-India consumer survey that we are conducting.” When contacted, even Wal-Mart’s CEO-emerging markets, Raj Jain, said that he was not aware of any such development.
The Congress’ allergy to the Wal-Mart name in Indian retail could have been aggravated by its humiliating debacle in last month’s municipal elections in Delhi. The magnitude of the Grand Old Party’s defeat at the hands of the BJP was attributed to the anti-Congress stir by local retailers and traders, irked by the sealing drive in the Capital. Wal-Mart’s debut in India has also provoked opposition from small traders and retailer groups around the country and the Congress would be wary of antagonising them further. Bharti has a joint-venture with Wal-Mart for cash and carry operations (wholesale trading that would source goods and manage logistics but cannot sell anything to anyone without a sales tax registration). Policy spanner in works
Policy prevents Wal-Mart from having any stake in Bharti’s front-end retail venture. However, Bharti is likely to source technology and know-how from Wal-Mart for its front end operations and pay royalty for these, apart from sourcing goods from the cash and carry joint venture. Nothing in the policy on FDI in retail prevents Bharti from using Wal-Mart’s name in its retail operations and paying a fee for this franchise.
While Bharti is yet to make up its mind on the name of its retail chain, the message from the ruling party at the Centre is loud and clear: Don’t embarrass us by putting Wal-Mart in the name, leaving scope for the Opposition to campaign that the government has allowed foreign investment into retail. Once the cash and carry and retail operations start procuring farm produce and manufactured goods on an extensive scale, these suppliers would constitute an interest group strongly in favour of organised retail. But the growth of a farm and SME lobby of beneficiaries of organised retail would be gradual, while opposition to organised retail is already high-pitched, thanks to politicisation.
Interestingly, during the NDA regime from 1999-2004, the Congress had maintainted its ideological position against the opening up of the retail sector. Priya Ranjan Das Munshi, who was then chief whip of the Congress in the Lok Sabha, had even opposed the move to allow 100% FDI in cash & carry in 2000. However, ever since the UPA government assumed power in 2004, international retailers like Wal-Mart had managed to win over some prominent Congress leaders, including high-profile Cabinet Ministers. Things were moving along fairly smooth for the Bentonville, Arkansas headquartered retailer in India, till Sonia Gandhi took the matter in hand this January. She wrote a letter to the prime minister, asking him to conduct a comprehensive study on the “impact of transnational retailers on small mom & pop stores.” ICRIER was duly commisioned to conduct a study on the subject by the department of industrial policy and promotion. Opposing voices from overseas have also joined the anti-Wal-mart chorus. The American labour leader and leading anti-Wal-mart crusader Wade Rathke flew down to India to share his experiences with Indian counterparts, comprising organisations such as India FDI Watch, Confederation of All India Traders and Federation of Associations of Maharashtra (FAM).
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