Mumbai: The Uttar Pradesh government has announced the withdrawal of the new agriculture infrastructure and investment policy and asked all major retail chains, including the 10 new supermarkets run by Reliance Industries, to close.

A meeting of the state cabinet chaired by chief minister Mayawati took the decision to scrap the policy on August 23, just 20 days after announcing it with much fanfare.

The Bahujan Samaj Party (BSP) government had launched a pro-retail sector policy on contract farming in the hope of attracting investments to the tune of Rs40,000 crore by 2010.

The order to scrap the policy came after protests by traders and some political activists against the opening of the modern, air-conditioned Reliance Fresh stores.
The cabinet cited attack on Reliance Fresh and Spencer's stores as the trigger for the decision.

The local administration first took the decision to close down such stores in the state capital and in Varanasi, apprehending that there could be a law and order problem, Mayavati said.

She said the policy needs to be reviewed in the light of the protests against these retail stores. The UP government has constituted a committee that includes principal secretaries of housing, home, agriculture and health as members.

"I have constituted a high-level committee to review the whole affair and until the committee gives a green signal, Reliance Fresh stores will remain shut," said Mayawati.

Reliance is investing over $5.5 billion in retail business, which will include hypermarkets, supermarkets, discount and department stores.

The UP government's move comes as a blow for attempts to corporatise the country's mostly family-run $350 billion retail industry. Retail industry in the country is expected to double in size by 2015, and both local and foreign companies are keen to enter the market.

Currently about three per cent of India's market is organised retail, tiny compared with other large economies.