"It is our considered view that as the domestic retailing is underdeveloped and is in a nascent stage, it is important that this sector is allowed to grow and consolidate first before any liberalisation," he said in a letter to Union Minister of Commerce, Industry and Textile Anand Sharma.
"We have to be very cautious and careful because at stake is the stability of vital pillars of our economy-retailing, agriculture and manufacturing," Kumar said.
It needs to be highlighted that the negative effects of FDI in retail in terms of job loss, displacement of small retailers and undermining of traditional supply chains by the monopoly power of multinational retailers far outweigh the professed benefits, the Chief Minister said.
"Therefore, the case for opening up of the retail sector to FDI does not seem to be justifiable and is converse to our policy of growth with justice. Thus, in view of the above it is not possible for us to accept FDI in retail in our state," he said.
Finally in the interest of farmers, retailers and consumers, the central government should reconsider its decision for liberalisation of FDI policy in multi-brand retail, he said.
The Chief Minister said that he had received Sharma's letter regarding the union cabinet's decision for liberalisation of the Foreign Direct investment (FDI) policy in multi-brand retail.
The policy seeks to transform rural economy and unlock The policy seeks to transform rural economy and unlock supply chain efficiencies in the agri-business, Kumar said, adding "though the stated objective of the policy cannot be disputed we have serious apprehensions and reservations on the path chosen to achieve these objectives".
He said the premise that opening up FDI in multi-brand retail will bring much needed investment, technologies and efficiencies to unlock the true potential of the agriculture value chain is far fetched.
On the contrary, the liberalisation of the FDI in multi-brand retail would jeopardise the unorganised retail sector and adversely affect the small retailers, farmers and consumers, he said.
It will give rise to monopolies of large corporate houses which can adversely affect the pricing and availability of goods, he said. The global retailers through their retail chains will set up backend "captive infrastructure" meant for their own business operations and not openly available for the farmers, consumers and public at large.
Therefore, the claim that MNCs would dramatically transform and modernise the food supply chain in India is nothing but half-truth, he said.
"We must accept that broad based modernisation of the food supply chain in a country of our size cannot be brought about by MNC retailers, who are driven by their narrow business interests," he said.
There is massive scope for expanding storage, warehousing and cold chain infrastructure in the public and cooperative sectors in India and improving their management.
Allowing FDI in retail cannot be a substitute for positive public intervention and desired level of public investment in this crucial area, the Chief Minister contended.