Metro gets eastern India licence, with conditions

By Sujoy Dhar

KOLKATA, India, Oct 10 (Reuters) - Germany's Metro AG (MEOG.DE) on Friday received a new licence for its cash and carry wholesale arm in West Bengal state, with the communist government limiting its activities to protect farmers and small traders.

Metro, Germany's biggest retailer, had planned to invest $120 million in at least four new cash-and-carry centres in eastern West Bengal state, doubling the number of centres in India.

The All India Forward Bloc, an ally of the state's communist government, had last month stopped the state from renewing Metro's licence, insisting on conditions that would prevent Metro from contract farming, which it says will hurt small farmers.

The Forward Bloc, which holds the portfolios of agriculture and agricultural marketing in the state, has also opposed the entry of large local corporates such as Reliance Industries (RELI.BO) and the Goenka Group in retail and contract farming.

"We see this as our victory," said Naren Chatterjee, a Bloc leader who heads the state's agriculture marketing board.

"They got a new licence, but on conditions that deny them entry in retail and contract farming."

India allows foreign multiple-brand retailers to operate only via wholesale or franchise and licence arrangements in its fast-growing retail market, which is forecast to nearly double from an estimated $350 billion by 2015.

Metro's global rivals Wal-Mart Stores (WMT.N) and Tesco Plc (TSCO.L) plan to set up wholesale cash-and-carry operations soon, and Carrefour (CARR.PA) has also said it plans to enter India.

Metro, which has four wholesale centres in India, on Friday said it was happy to operate within the limits set by the state.

"We are keen to start our operations in Kolkata," said Martin Dlouhy, managing director of Metro Cash & Carry India, adding the first outlet is expected to be operational in six to eight weeks.

The limits placed on Metro comes on the heels of Tata Motors' (TAMO.BO) decision to move a factory for the ultra-cheap Nano car out of the state to business-friendly Gujarat state, after violent protests by farmers in West Bengal against the factory. (Additional Reporting by Tamajit Pain; Editing by Rina Chandran)