Business Today

Bizarre banishment

Why Reliance Retail will be back in Uttar Pradesh.

Pallavi Srivastava        Print Edition: October 21, 2007

It’s a peculiar political tightrope that Mayawati’s government in Uttar Pradesh is walking. Despite the state farmers protesting against closure of Reliance Retail stores in UP, the local government has bowed to pressures from middlemen in the retail trade and ordered the company to shut its 23 (15 in NCR) stores across the state. If Chief Minister Mayawati is turning away investment, employment and benefits to consumers, it’s probably because she doesn’t want her political rival, the Samajwadi Party, whose member of Parliament Banwari Lal Kanchan is leading the protest against Reliance Retail as National President of Rahstriya Vyapar Mandal to capitalise on the anti-retail sentiment and, hence, the votes.

Meanwhile, Reliance Retail has decided not to take it lying down. While it has kowtowed to the government’s diktat, it has also sought to turn the popular sentiment against the government by letting go some 235 contractual employees employed by its franchisees. Where is the tussle between the state and Reliance headed? In the short run, to a stalemate. As per the state’s initial order, Reliance’s stores were to remain closed between August 23 and October 23. Simultaneously, Mayawati had set up a committee headed by her Cabinet Secretary Shashank Shankar Singh to study the feasibility of allowing organised retail in the state. The committee was to examine issues related to law and order, hygiene, licensing and location of the stores across the state.

The five-member committee was supposed to submit its report by September-end, after which the government was to take a final decision on the issue. On its part, Reliance Retail is hopeful of reopening the outlets before the end of October. “Exiting the state is not an option as it will trigger a chain reaction. If we exit Uttar Pradesh, we might be asked to leave other states too,” says a company official. Apparently, it has not stopped its procurement operations at the various collection centres in the state, since it buys here for its stores in other states as well.

Reliance has good reason to dig in its heels. It claims to have invested nearly Rs 4,000 crore in the state, which is also India’s biggest by land mass. “We are ready to roll out another 44 stores in the state and after the issue gets sorted out we might do a multiple opening of stores as the backend infrastructure is already in place,” says the Reliance Retail official.

There’s another reason why Reliance can’t pull out of UP. Its stores have been under attack in others part of the country as well, including Ranchi, Indore, Kolkata and Bhubaneswar. In most of these locations— except Bhubaneswar, where the attacks were recent—Reliance has been able to go back to normal functioning. If it were to give into opponents, it would mean having to kiss goodbye to its ambitious retail plans. And that’s a thought, it’s safe to assume, Chairman Mukesh Ambani isn’t even toying with.

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