Wal-Mart willing to open 'hundreds of stores' in India if allowed

The world's largest corporation and US retailing giant, Wal-Mart will open "hundreds of news stores" if the government allows foreign companies to invest in the sector, Raj Jain, the company's head in India said. The firm, under its 50:50 joint venture with Bharti Enterprises, has just two stores currently and will expand very slowly if the government does not allow foreign companies to address the retail customer.

"It can only be seven or eight or ten stores in a year if it is not opened up," Jain, who was inaugurating an ambitious workforce training centre in Delhi said.

Under the current arrangement, Bharti-Wal-Mart owns and operates only wholesale or 'cash and carry' stores which are open only to traders and not to ordinary customers. The current government policy prevents companies with foriegn corporate investment from opening retail shops, fearing backlash from existing retailers -- primarily small 'mom and pop' companies.

The policy, however, is up for review and the government has invited stakeholders' views on the subject. Some traders' associations have already started campaigning against any liberalization move, taking out advertisements in the newspapers.

Bharti and Wal-Mart set up their venture four years ago, restricting the joint company to the back-end and allowing Bharti to open fully owned retail stores to take advantage of the back-end facilities such as warehouses and supply relationships created by the joint venture. The expected liberalization never came and both the joint venture as well as Bharti's own 'easyday' stores have been going slow on expansion.

Direct sourcing from the farmers was supposed to ensure higher price for the producers while cutting out middlemen's commissions ranging from one-third to two-thirds of the final price.

Jain said it is futile to expect foreign firms to invest heavily into setting up cold chains and collection centres if they know that they cannot reap the rewards for their investment. "To benefit from it, we need to have our own stores.. Currently, we collect the produce directly from the farmer, but then we have to sell it back to the Mandis [traditional wholesale markets] bringing it back into the same old system. In the end, it doesn't help anyone," he pointed out.

Echoing government's recent stance favoring foreign investment, Jain said that there was a lot of fear and misinformation about the role played by foreign companies in the retail sector. "We had the same concerns in Amritsar.. Today, the local traders are also happy," Jain said, pointing to the role played by the huge Cash and Carry wholesale store in supplying merchandise to small retailers.

Jain also said Bharti will expand its retail stores from around 80 to 140 by the end of the year, taking the total number of employees from 4,000 to around 5,100. Bharti-Wal-Mart will set up its own training centres to train under privileged youth to work in retail stores, a model it has inherited from its US parent.

Jain, who also heads the joint venture, pointed out that Wal-Mart is open to adjusting its equity stake in line with any new government dictat. Some officials in the department of industry have indicated a possible cap of 49% for the foreign partner if they are allowed to invest into retail chains after the ongoing review.

Delhi Chief Minister and congress leader Sheila Dixit, while lauding the effort to train low-skilled youth at the inauguration of the training centre, refused to clarify whether she supported the expansion of big corporations into the retail sector. "It is a good thing for the youth to get training and employment..," she said, adding that her opinion on retail chains is reserved for the party only.