India’s largest trader body accuses German retail giant of violating FDI policy

Before the pandemic, Metro Cash & Carry was planning an aggressive expansion but recent reports indicate the retailer wants to exit India. But before it does that the Confederation of All India Traders (CAIT) has asked the government to launch a probe into the retailer for "violating foreign direct investment (FDI) policy by engaging in business-to-customer practices".

"Metro Cash & Carry is violating FDI policy by engaging in B2C practices in the garb of B2B business, which they're allowed as per law," CAIT secretary-general Praveen Khandelwal said.

Foreign companies can't engage in multi-brand retail as per India's FDI policy. German wholesale retailer Metro AG opened its first cash and carry store in India in 2003.

CAIT, which represents over 40,000 trade associations in India, said the traders do not fear competition but are protesting against illegal business practices and uneven playing fields.

Metro Cash & Carry, an organised wholesaler and food specialist, has 31 stores across India. "Customers take trolleys inside stores, and buy items like a retail store which isn't allowed as per law," Khandelwal said. "A B2B business mandates GST registration for both participants. How is it possible for common customers having a GST number?"

He said as per various media reports Metro Cash & Carry has a business of Rs 6,500 core and that it is slated to be sold for Rs 13,000 crore. "The reports also say that the company may send Rs 10,000 crore to its parent company in Germany," Khandelwal said, urging the commerce ministry to probe such business malpractices.

The CAIT said that wherever the company's stores opened, its predatory pricing hit the businesses of small traders and businessmen.

"For example, in Jaipur, Metro Cash & Carry is selling a TV for Rs 22,000, which is otherwise sold in the open market for Rs 30,000," Khandelwal said. He also added that the company was illegally issuing add-on cards on the same GST numbers.

"A trader having GST number for the wholesale business of electronic items can't engage in the business of other items like edible products, or fast-moving consumer goods," he said.

The CAIT said the traders have raised these issues before the government and the Competition Commission of India and have urged swift action as Metro Cash & Carry "has given false info to authorities".

Meanwhile, a Metro AG spokesperson said, "Metro has been operating in India since 2003 and has worked towards making small and independent businesses, especially kiranas successful and profitable through our robust network of wholesale stores. Metro has been actively advocating about creating a level playing field for all players in the retail sector to protect the interest of small retailers and kiranas.

"In the last 19 years of operation, we have had an impeccable track record w.r.t regulatory compliance and have been fully compliant with the applicable FDI regulations and laws of India.

"Therefore, we condemn the false and malicious allegations being made on us with vested interest. We question the veracity of such false data which is maliciously being used by CAIT. As a leading global organization, we are governed by robust processes, ethics and governance mechanisms to ensure compliance with local policies and procedures."