Big grocery retailers may come under licence raj

Mayur Shekhar Jha & Rajat Guha NEW DELHI (ET)

THE government is mulling the introduction of a licensing regime to regulate grocery, fruits and vegetable retail in the country. As per the model being considered by policy makers, any shop dealing in retail of food and grocery items such as atta, edible oil, fruits and vegetables, and spread over 10,000 sq ft will mandatorily have to seek licence from the local urban body managing that area. The objective is to check unfettered growth of grocery retail and to protect small kirana stores by restricting the mushrooming of organised retail outlets in a particular catchment area. When implemented, the licensing policy will have a direct impact on all hypermarkets where selling of food and grocery items is proposed. Both Reliance and Bharti plan to operate huge hypermarkets, ranging from 50,000 sq ft to even 1.5 lakh sq ft in certain cases.
The retailers will be allowed to operate only in a specified catchment area, thus minimising the scope of competition between them and local kirana shops. For one, in the case of Delhi, the MCD, which is the administering authority in most areas, will be empowered to give these licences. Large mega outlets and hypermarkets will be asked to operate from outside the city. The policy is being worked out by the commerce, urban development and labour ministry. According to sources, the move has come at the back of Left parties’ demand of regularisation of retail. “The Ministry of Urban Development is already finalising zonal plans. The zonal plans for Delhi will be ready by January next year. Subsequently, the same model will be followed in other states.
The move is aimed at protecting the interest of local kirana stores from unfair competition thrown up by large corporate retailers,” a senior government official said. Zonal plans divide a city or town into different zones, specifying areas for mixed land use. These plans are then incorporated in the city’s master plan. However, when implemented, the mandatory licensing will not impact the basic food and grocery format of retailers like Reliance and Future Group and the proposed Bharti Retail.

Reliance in retail talks with Bata

IT COULD be one of the biggest tie-ups in Indian retail if it were to go through. According to sources, talks are on between India’s oldest retailer, Bata and the most ambitious entrant into the retail space, Reliance Retail. As part of its retail strategy, Reliance plans to get into footwear retailing . The foray into the footwear segment is being overseen by G Sankar who was formerly MD, Lifestyle India, and is targeting a turnover of Rs 3,000 crore in three years. If the rumoured tie-up turns out to be a reality then here is how it would work.
Bata showrooms across India would retail the footwear brands planned by Reliance and in turn Bata brands will find space on Reliance Retail shelves. Reliance is believed to be aggressively pushing for the deal because it would give them immediate access to a 1,000 plus Bata stores, across the country located more often than not in the prime shopping districts. Say sources close to the negotiations, “Bata has the width and depth which Reliance is extremely keen to tap into. An agreement such as this one could significantly accelerate Reliance’s footwear retailing plans.” While a tieup with Reliance might add to its distribution network, Bata’s strong performances of late might mean that it can afford to do the deal on its own terms.
The two companies have been parleying for over a year now but no agreement is believed to be in sight. Sources say that the sticking point has been Reliance’s insistence on equity participation which Bata is unwilling to accept. ET sent a questionnaire to both the companies asking for an official response. There was no comment forthcoming from the officials at Reliance Retail’s footwear vertical based out of Bangalore while officials at Bata categorically denied that any such talks had taken place. Shaibal Sinha, CFO, Bata India, told ET: “Reliance Retail has given a letter of intent (LOI) to Riverbank Holdings, our joint venture which is developing the real estate township in Batanagar, Kolkata for setting up a hypermarket and non-footwear speciality store in the township.