CAIT alleges FDI policy violations by Metro; German retailer denies charge

Traders' body CAIT on Thursday accused Metro AG of fund diversion and violating FDI regulations in India, a charge which the German cash-and-carry major rejected as "false and malicious".

The Confederation of All India Traders (CAIT) raised serious objections over the business practices of Metro AG's Indian subsidiary Metro Cash & Carry.

Metro Cash & Carry India currently operates 31 stores in the country under the brand Metro Wholesale.

Metro AG, which had entered the Indian market in 2003, is now reportedly scouting for a partner to sell a majority stake in its Indian subsidiary. Several entities, including Amazon, Thailand's Charoen Pokphand (CP) Group, Reliance Retail, Avenue Supermarts (D-Mart), Tata Group and Lulu Group, are said to be in the race to acquire the majority stake.

"As per the media reports Metro Germany is looking to sell the India business and make profits of over Rs 10,000 crore on its investment in India which is nothing but the diversion of funds by accruing huge profits in India in past years," CAIT said in a statement.

The traders' body alleged Metro was "blatantly operating a B2C business" in the garb of cash-and-carry operations, in complete violation of FEMA and GST laws, making a "mockery" of the system.

CAIT said as per regulations, a cash-and-carry (wholesale) operator has to take proof of tax registration from its customers and alleged violation by Metro Cash & Carry India through issuance of bogus cards of tax registration to consumers who were visiting the stores.

"We have complained to the Enforcement Directorate, which is investigating the matter. There is nothing to investigate as the violations are large-scale and blatant. We are confident that the Enforcement Directorate will soon complete its investigation and impose a fine of at least Rs 12,000 crore on Metro India," CAIT said.

Rejecting the allegations, a Metro AG spokesperson said, "In the last 19 years of operation, we have had an impeccable track record w.r.t regulatory compliance and have been fully compliant with the applicable FDI regulations and laws of India."

"Therefore, we condemn the false and malicious allegations being made on us with a vested interest," the spokesperson said, while questioning the veracity of "such false data which is maliciously being used by CAIT".

As a leading global organisation, Metro AG is governed by robust processes, ethics and governance mechanisms to ensure compliance with local policies and procedures, the spokesperson added.