Reliance Industries Ltd., India's most valuable company, and Aditya Birla Group are among retailers that will be restricted from opening stores in the state of Kerala as opposition to nationwide chains mounts.

Retail companies will be barred from rural areas and only allowed to operate one or two stores in cities, said C. Divakaran, Kerala's minister for food and consumer protection.

Expansion plans by retailers are being threatened across India as opposition intensifies from political parties, street vendors and family run stores. Last week, the state government of Uttar Pradesh ordered the closure of stores operated by Mumbai-based Reliance in two cities.

``The common people are interested in getting their food grains, vegetables and essential commodities at a fair price,'' Divakaran said in a telephone interview today from Thiruvananthapuram, the capital of Kerala.

Prime Minister Manmohan Singh's ruling coalition has lost ground in state and provincial elections this year because of rising prices of food. Agriculture accounts for a fifth of India's economy and provides livelihood to more than three- fifths of the country's population.

The Kerala government is seeking to get the legislation that will enable the retail curbs approved by the end of the year, Divakaran said.

Reliance spokesman Tushar Pania declined to comment.

Easing Rules

The Indian government, which is seeking to ease overseas investment rules in the retail industry, allows foreign investment in companies that sell a single brand. Earlier this month, Wal-Mart Stores Inc., the world's biggest retailer, and New Delhi-based Bharti Group agreed to set up wholesale stores and a supply chain unit.

Along with Aditya Birla and Reliance Retail, Pantaloon Retail India Ltd., the nation's biggest publicly traded retailer, and other companies will compete for a market estimated by consultant Technopak Advisors Pvt. to rise more than eightfold to $97 billion by 2012.

The Kerala government has proposed a bill called the Kerala State Essential Commodities Act, 2007, which is being considered by the state's legal department, Divakaran said. The state government will subsequently seek approval of the legislative assembly to make it a law, he said.

Federal Government

The state government hasn't received any requests for clarifications on its retail policy from the federal government, Divakaran said. The Financial Express newspaper today reported the central government had sought an explanation from the states of Uttar Pradesh and Kerala for putting restrictions on retail store chains.

``It is a question of state government power and state government policy,'' Divakaran said.

The federal government hasn't sought any explanation from the states.

``We have no authority to take any action,'' Sharad Pawar, federal minister for agriculture, food and consumer affairs, told reporters in New Delhi today. ``As per these laws, I don't think any state government can take a decision to close any establishment permanently unless there is violation of any law.''

The Communist parties, which lead the state coalition government, have opposed the federal government's moves to open up the retail industry to local and overseas investment.

To contact the reporter on this story: Subramaniam Sharma in New Delhi at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it .