India has asked its central bank to examine allegations that US retail giant Walmart has illegally invested in Indian supermarkets since 2010, the Press Trust of India reported Thursday.
India’s commerce ministry asked the Reserve Bank of India to look into allegations that Walmart broke foreign exchange laws and secretly invested $100 million in a local supermarket chain, PTI said, citing a government official.
“Since the RBI is the focal point for foreign remittances, the matter has been referred for examination,” a senior official in the ministry, who declined to be named, told PTI.
Calls by AFP to the commerce ministry were not answered.
An official at Prime Minister Manmohan Singh’s office told AFP that Singh had received a letter from a lawmaker accusing Walmart of making illegal investments and had asked the commerce ministry to examine the matter.
K. Muthu Kumar, officer on special duty to the prime minister said, “the letter alleged that Walmart circumvented regulations to invest in India”.
“We have forwarded the letter to the commerce ministry and are waiting to ascertain the facts,” he added.
The unwelcome attention could put a dampener on Walmart’s plans to open its first retail outlet in India within the next 18-24 months, after Singh’s government passed an order in September allowing foreign supermarkets to operate in the country.
According to The Economic Times newspaper, the letter was written by M.P. Achuthan, a member of the Communist Party of India who sits in the upper house of parliament.
The lawmaker alleged that Walmart secretly invested in India’s retail sector by using a fraudulent holding company named Cedar Support Services Ltd. and demanded that the government “undo this illegal investment immediately”.
He also asked Singh to ban the retail giant from ever operating in India again.
A report by the Indian television channel CNBC TV18 said that Walmart invested $100m in March 2010 in Cedar, by buying convertible debentures that give the US retailer a 49-percent stake in the real estate consultancy.
According to the report, Cedar, originally named Bharti Retail Holdings, then allegedly used the funds to operate its retail subsidiary Bharti Retail, apparently violating India’s regulations on foreign direct investment.
A Walmart spokesperson told PTI, “we are in complete compliance with India’s FDI laws. All procedures and processes have been duly followed and details filed with relevant Indian government authorities, including the RBI”.
Walmart and Bharti Enterprises, the parent company of Cedar, currently manage a chain of wholesale supply outlets in India, under a 50-50 joint venture agreement, permissible under Indian law.
Although India recently allowed foreign retailers to set up shop in the country, just a third of India’s 29 states have welcomed the news, with the others fearful of its impact on hundreds of thousands of small store owners.
India central bank examining Walmart allegations: report
