Reliance cuts troubled retail plans further

By Rina Chandran

MUMBAI (Reuters) - Reliance Industries Ltd has ended the services of about 400 franchisees for its planned retail operations in West Bengal and has shelved a rollout in Orissa because of protests from small traders.

The moves come after Reliance Retail, a subsidiary of India's biggest listed firm, last month laid off 1,000 staff in Uttar Pradesh after the state shut 10 Reliance Fresh supermarkets, following protests and attacks by small traders.

Reliance, which is spending more than $5.5 billion in its retail venture, had planned to open about 500 Reliance Fresh supermarkets in communist-ruled West Bengal and about 150 in Orissa, said a senior company official who asked not to be named.

There have also been protests in other, mostly northern and eastern states, while communist-ruled Kerala is drafting a law to restrict Reliance to protect jobs.

"We are very clear: if a particular state cannot guarantee protection, we will not go and open stores," said the official.

"But the central government appears to be keen on the industry's growth, so we are optimistic that these issues will be sorted out soon," the official said.

Modern retail faces political obstacles because of fears millions of small shopkeepers could lose their jobs in the fragmented but fast-growing industry that is forecast to double in size by 2015 from an estimated $350 billion.

India limits foreign multiple-brand retailers to wholesale or franchise and licence operations. Talk of easing foreign investment rules have cooled in recent months, prompting Tesco Plc and Carrefour to shelve their India plans.