Thursday, April 10, 2008

Retail traders' problems vs consumers’ interests

The traders’ organizations are agitating against the entry of retail giants. There are many contradictions in the government’s approach to retail chains. There have been incidents in which CPI (M) warriors destroyed stores which were opened with the permission of civic bodies controlled by the party. While one institution is able to function without hassles in some places it faces ban in some other places. One institution which now encounters hostility has been actually functioning in the State for 80 years. To begin with, its customers were white folks and natives with high incomes. Later it attracted the upper middle class. Now it is attracting even more people and facing opposition of a kind it did not encounter earlier.

Pinarayi Vijayan outlined the policy of the State party and government while addressing traders demonstrating outside Raj Bhavan in February. He declared that no domestic or foreign giant would be allowed. He revealed that the Left Democratic Front had decided that local self-government institutions should not give them permission. The Corporation of Kochi decided later not to allow retail monopolies to open supermarkets. It did not cancel licences issued earlier. However, it decided to raise the licence fees payable by supermarkets and to impose a development surcharge on them. Since the additional expenditure on this account can be transferred to the customers, the decision is unlikely to upset the giants.

The stand of the government of Kerala, which is led from inside by two Politburo members and from outside by a third one, are not in keeping with the proposals framed by the CPI (M)’s central leadership last year. That document says the party is opposed to the entry of multinational corporations in the retail sector. It does not oppose the entry to domestic companies. However, since they may pose a danger to small traders, the party feels there must be severe restrictions on them. It outlines the kind of restrictions that are called for. Licences must be made compulsory for shops whose area exceeds a prescribed limit. The number of shops most be fixed in proportion to the population. There must be a ceiling on the number of shops a company can open in a town or in a State.

The party stipulates that municipal bodies must constitute committees with representation for street vendors and traders’ organizations to decide on grant of licences. It does not ask that consumers be given representation.

There are other contradictions, too, in the approach of the authorities. They are opposed to private companies starting hypermarkets. But the State-owned Civil Supplies Corporation has announced plans to set up hypermarkets at Thiruvananthapuram, Kochi and Kottayam with an outlay of Rs.1.40 billion. The government, which does not want foreigners to come here, is now looking for franchisees for Supplyco in the Gulf States.

The CPI (M) formulated its proposals after detailed studies. It says the retail sector provides employment to 40 million people in the country and contributes 10 or 11 per cent of the gross domestic product. Small unorganized traders make up 97 per cent of the total. The conclusions the party draws from the material it has gathered may not all be correct. For instance, it points out that in India there are 11 shops for 1,000 people and this is higher than in Europe and the rest of Asia. The area of 95 per cent of the shops is less than 500 square feet. According to National Sample Survey reports, between 1999-2000 and 2004-2005 there was a fall of 1.2 million in the number of self-employed urban traders. On the basis of these figures, the party concludes that if the organized retail trade is allowed to grow further the plight of the small traders will get worse.

What these figures show is that an average trader has only 91 customers. That is to say, his shop serves the needs of only about 15 families. A giant is not needed to fell one with so weak a base. He is doomed to be washed away by the tide of time. Kerala is undergoing rapid urbanization. As people move from small houses to big mansions and luxury apartments their lifestyle changes. They will seek shopping facilities in keeping with their new style. They will give up the shopkeeper who cannot meet their need. It is foolish to imagine that a shopkeeper who fails because he does not change with the times can be maintained like the ‘protected’ teacher.

It was the liberalization policy, initiated by the Centre 17 years ago, that paved the way for the entry of big players in the retail sector. How many people remember that the Kerala government had entered the sector 17 years earlier than that? The Civil Supplies Corporation, which is under the government, and the Consumer Federation, which is under its control, have been active in the retail sector since 1974. But the small traders do not view Supplyco, which has 1,200 retail outlets, or Consumerfed, which runs supermarkets in the cities, as threats. When we inquire into the reasons for this, we find that what they fear is not merely the size and financial clout of the private companies but also their higher efficiency.

Government spokesmen have indicated that there are plans to enact legislation to prevent the giants gobbling up the small traders. The government certainly has a duty to help them. What it should do is to provide them help to make the changes that the present time demands. It should not try to conserve them the way it seeks to protect species that face the threat of extinction. That will be against the interests of the consumers.
Based on column "Nerkkazhcha" appearing in Kerala Kaumudi dated April 10, 2008

No comments: