The Confederation of Indian Industry has asked the government to clarify the terms under which German retail chain Metro AG was allowed to operate in the 'cash & carry' wholesale trade segment in the country.

Metro is the world's third largest player in the area.

"CII's retail group has written to the government against the working of Metro in the country," CII former president and RPG Group Vice-Chairman Sanjiv Goenka said.

He added that while the German company got an approval from the Foreign Investment Promotion Board to set up base in India only in the wholesale trade segment, the company was selling products to the final consumers directly.

Goenka added that Metro was not selling to retailers including his own supermarket chain, Food World, which was the basic condition to allow the company to set up shop in the country.

"While the company is not selling to retailers like us, it is approaching various companies and selling its products to their employees at cheaper prices in violation of foreign direct investment norms," Goenka said.

Industry sources said CII's action came after the members of the CII retail group sent strong letters to Vikram Bakshi, chairman of CII's national committee on retailing.

The sources added that the members wanted a clarification on whether the company was bypassing regulations.

The sources also said that the finance ministry had already asked the Karnataka government to submit a clarification on the matter at the earliest.

It could, however, not be ascertained whether the Karnataka government has replied to the Centre's query.

Chain reaction

• German company got an approval from the Foreign Investment Promotion Board to set up base only in the wholesale trade segment.
• The company is selling products to the final consumers directly, says CII.
• CII action comes after members of the CII retail group have sent strong letters to Vikram Bakshi, chairman of CII's national committee on retailing.