Metro AG, the German retail major that has been under fire from Indian traders after opening two stores in Bangalore, hit back by saying big local retail chains and wholesellers with vested interests were behind the controversy.

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The company also said it had got approval from the government to undertake business-to-business sales -- not limited to those with a valid sales tax registration -- and was authorised to sell to small retailers with business licences as well as institutional buyers like hotels, restaurants and corporates.

"In case the government retracts now, we are ready to fight it out," Metro Cash & Carry India managing director Harsh Bahadur told Business Standard in an exclusive interview.

The government is reviewing Metro's trading licence. He, however, hoped that the initial hue and cry would die soon.

Bahadur said the fracas was the handiwork of big retail chains, distributors and wholesellers who were scared that Metro would sell to small retailers at lower rates.

He said, "Our system saves on time and transaction costs, ensuring quality at the best possible price. It allows small retailers to increase their range and offer competitive rates, thereby offering stiff competition to Indian wholesellers."

The German firm received government approval in 2000 to set up a wholly owned arm in India for wholesale trading.

In the original foreign collaboration approval letter, the government gave it approval to sell only to retailers with a sales tax registration and not to retail customers.

However, the company requested the government to widen its scope of business to include retailers with business licences since businessmen in several states worked without sales tax registration numbers.

The government amended the approval in December 2002 and said the company could undertake business-to-business cash and carry trading, without clarifying what was construed as business-to-business sales.

Bahadur said his current client list, therefore, included apart from retailers with valid sales tax registration numbers, those registered under the Shops and Establishments Act or those that had trading licences, even business licences given by local panchayats.

Countering allegations that Metro had procured a retail drug licence and was selling products like beer and cigarettes in limited numbers, Bahadur said the retail drug licence was required since small factory owners, companies or restaurateurs picked up limited medicines sold over the counter for stocking their first-aid kits.

Bahadur said Metro had invested Rs 175 crore (Rs 1.75 billion) in India and had set up two stores in Bangalore, which were expected to generate revenue worth Rs 150 crore (Rs 1.5 billion) initially.

On future plans, he said the company would prepare a model that would be replicated at other centres.

Indicating his expansion plans, Bahadur said in China where it had 19 centres, the company planned to invest an additional $700 million to open 40 more distribution centres in the next five years.