Reliance lays off 1,000 as India's retail stumbles
26 Sep 2007 09:14:12 GMT Source: Reuters
(Adds employment details para 5, updates share price para 11) By Alistair Scrutton NEW DELHI, Sept 26 (Reuters) - Reliance Industries <RELI.BO>, India's biggest listed firm, is laying off 1,000 staff in the country's most populous state after failed attempts to reopen Western-style supermarkets, which closed after protests from small traders. The move by Uttar Pradesh state to shut 10 Reliance Fresh supermarkets in August highlighted how efforts to modernise India's economy face political obstacles amid fears that millions of small shopkeepers could lose their jobs. The protests also reflected wider social tensions in India, where private investment to fuel the booming economy frequently leads to protests from traders scared of new retail competition and villagers worried about the loss of their land to multinational factories. "We have issued termination notices for around 1,000 staff," a senior company official, who asked to remain anonymous, told Reuters on Wednesday. "It's a critical situation." "We do not have plans to leave Uttar Pradesh, but for the moment everything is on hold," the official added. The layoff involves more than a third of Reliance's 2,800 workforce in Uttar Pradesh. Wal-Mart Stores Inc <WMT.N>, the world's biggest retailer, also faced protests when officials came to India for a deal with Bharti Enterprises. Foreign retail giants Carrefour <CARR.PA> and Tesco <TSCO.L> have shelved investment plans in India amid the uncertainty. Reliance Retail, a subsidiary of Reliance Industries, had planned to invest more than $5.5 billion in its venture, which will include hypermarkets, supermarkets, discount and department stores. Large companies account for only 3 percent of India's $350 billion retail market, which analysts estimate could double by 2015. But the company has become a lightning rod for protests against modernising retail in some Indian states, while being welcomed elsewhere. Shares of Reliance Industries were down 2.1 percent late on Wednesday, lagging the broader market <.BSESN> which was 0.9 percent higher. EASY TARGET? In Uttar Pradesh, the company has so far failed to persuade the state government to reopen the stores, originally closed because of law and order problems after protests from traders. Home to about 170 million people, the state is one of the most crowded regions on earth. It is roughly the size of the United Kingdom yet only five nations, including India itself, have a higher population. In another blow for Reliance, around 15 stores in Noida and Ghaziabad, two booming middle-class towns on the outskirts of New Delhi, were shut over the last week on police orders, although staff have not yet been sacked there, the Reliance official said. This week, traders in eastern Orissa state ransacked two stores, forcing police to order their closure, one of several incidents in the last month across India, media reports said. Reliance's plans to open supermarkets in north and east India have now been delayed. Protests have focused on Reliance partly because its size and brand name in India make it an easy target for protesters. Some other local retailers, such as Spencer's, operate dozens of stores in India without facing so many protests. The closure in Uttar Pradesh may also be related to politics in one of India's poorer states. With talk of a possible early general election next year, many politicians are keen to appeal to poor voters with criticism of conglomerates.
