The government has decided to review the wholesale trading licence granted to German retail chain Metro AG following allegations that the company is indulging in retail trade in India by selling directly to end-users.

According to officials, the Foreign Investment Promotion Board reviewed Metro's case in its meeting last Friday for prima facie evidence of wholesale trade licence violation.

Facing a scrutiny

December 2000: FIPB approves Metro AG's proposal for cash and carry wholesale trade in India October 2003: Metro opens first shop in Bangalore amid protests from the Swadeshi Jagran Manch and traders' associations November 2003: Industry chambers protest, claim company is violating entry norms

"We discussed the original licence conditions under which the company was allowed to set up shop in India. Several industry chambers have complained that Metro is flouting the norms," said an official.

The official said if the board was convinced that the company was selling directly to customers in addition to retailers, it would revoke Metro's licence. "However, we will call the company soon to submit its version before the board," he added.

The finance ministry has sought sales tax-related information from the Karnataka government. Metro opened its first centre in Bangalore in October this year.

The officials said the government could find out the company's transaction details from the registration number provided to it by the state government.

Since sales tax was a state subject, the ministry was awaiting information from Karnataka's revenue department, they added.

Metro received the Foreign Investment Promotion Board's approval in December 2000 for undertaking cash and carry wholesale trading in India.

At the launch of its first store in Bangalore on October 20, Metro Chairman and CEO Hans-Joachim Körber said the licence was amended in December 2002 to allow it to undertake business-to-business sales.

The Metro Cash & Carry store offers around 17,500 food and non-food products, electronics, FMCG and white goods at competitive prices to registered traders, caterers, restaurants and other small and medium businesses, in all-cash deals. The company has invested about Rs 176 crore in India.

Industry chambers have claimed that Metro has tied up with various companies to offer products to their employees at cheaper rates, which is a form of direct retailing to customers.

The international trading and retailing group recorded sales of €51.5 billion globally in 2002.