While the current policy guidelines announced last month do not permit FDI in retail trading, it has allowed 100 per cent foreign investment in `Cash and Carry Wholesale trading'.

The sections affected by the move argue that foreign investment involved in this arena is too little to justify the opening up of the sector. With foreign companies lobbying hard for permission to allow 100 per cent FDI in retail sector in view of India's large middle-class population with disposable income, the small-scale sector is worried that they soon may have to compete with MNCs.

The large conglomerates in super markets, the small scale industry is worried, would freely source throughout the world and cripple the local industry. They cite the example of Walmart, which with a turnover of $200 billion and presence in eight countries, has sourcing offices in 57 countries.

"The move will also force the customer to buy much more than his actual needs. In case where a customer would need a soap, he would be compelled to buy it in a set of six or 12 units," said industry sources.

They argue that the Indian government should take note of the developments in UK where the Director General of Fair Trading has asked the Competition Commission to investigate and inquire into the operations of supermarkets which were operating against the public interest. The commission stated that the possible remedies include restrictions on new investment by the supermarkets.The commission in UK is also examining the pricing behaviours by the supermarkets and whether it tends to distort competition and restrict consumer choice.

Officials of the Bombay Small-Scale Association say that a large MNC which opened 22 chemist shops in Chennai had asked for a special discount of six per cent from the wholesalers. This was to enable them to sell the products at a cheaper cost and drive the small retailers out, they added.

India, currently has around 34 lakh retail outlets in various categories ranging from grocery stores, merchandise stores, tabaconists, chemists and confectioners. Added to that are four lakh fair price shops - a government sponsored distribution system selling medium-quality staple products, according to Mcgraw Hill College Division report on Foodworld Supermarkets in 1999.