Wal-Mart not to expand cash & carry until 2015

Excessive scrutiny from US authorities and an internal investigation to check if Wal-Mart had flouted the US corruption laws in India haveforced the US-based retail giant to shelve expansion plans for its cash-and carry stores in India until 2015.

The company had in October ended its local joint venture with Bharti Enterprises by buying out the entire stake in Bharti Wal-Mart Pvt Ltd. The company has 20 wholesale outlets under Best Price Modern Wholesale brand.

The investigations underthe US Foreign Corrupt Practices Act (FCPA), which bars American companies from bribing government officials to operate and retain businesses in foreign lands, had prompted the company declare a moratorium on expansion.

According to a report in The Economic Times today, Wal-Mart India aims to extend the moratorium on expansion by another two years as part of its FCPA compliance efforts.

“The freeze will apply to Best Price stores in Sangli and Sholapur in Maharashtra and Anand in Gujarat that have been mothballed despite being ready for more than a year, the report said.

[caption id=“attachment_971773” align=“alignleft” width=“380”] Did Wal-Mart violate RBI guidelines? AFP[/caption]

As part of the internal probe,Wal-Mart had earlier suspended its executives and refrained from signing new property deals in the last one year. The retail giant is not expected to acquire real estate for any Best Price wholesale outlets in the medium-term either.

Wal-Mart is one of the key foreign supermarket chains, which had been actively lobbying with the US government to convince India to open up its retail market segment - one of the largest in the world.

According to their severance agreement, Bharti acquired the compulsory convertible debentures held by Wal-Mart in Cedar, a company owned and controlled by Bharti, while Wal-Mart said it would continue to operate independently the Best Price stores opened since 2007.

After the ‘divorce’, Wal-Mart had also said it wants to serve India through its cash & carry business as it already had in place the supply chain infrastructure, direct farm programme, and supplier development that enables it to make good investments and provide good returns for its shareholders.

In fact, it has even maintained that India is an attractive destination and that it was “committed” to the country but restrictive conditions on the entry of foreign supermarket operators kept putting a spanner in its expansion plans.

Last month, the company had made a proposal of allowing the entry of its private label suppliers and inducting it as a possible sub-clause as part of the mandatory sourcing norm.

Currently the Department of Industrial Policy and Promotion deliberating on the company’s demand of allowing its private label suppliers by modifying the mandatory sourcing norm even though finance Minister P Chidambaram had nonchalantly remarked Walmart’s entry “will be a speck in India’s retail market.