India's Reliance Retail has suffered a fresh setback in its ambition to expand across India with a decision to shelve plans to open stores in the state of West Bengal.

Reliance, which plans to spend US$6bn on expansion over the next four years, has called off plans to open over 100 stores in West Bengal following opposition from local government authorities.

A leftist coalition runs the state government in West Bengal and elements in that alliance oppose the expansion of organised retail in the state. Consequently, Reliance has put on hold plans to open the stores and has laid off around 400 contract workers.

"It doesn't make sense until there is some clarity [on the situation]," a source close to Reliance told just-food this morning (1 October). The source said Reliance was looking to open 100 stores in Calcutta alone.

Elsewhere, Reliance has seen stores closed in Uttar Pradesh, India's most populous state, on the order of local authorities after protests from small shopkeepers. The closures in that state forced Reliance to draw up plans to lay off 1,000 workers.

The company wants to expand its store network to around 5,000 outlets across India by 2011 but problems in Uttar Pradesh and now West Bengal have cast doubt on its ambitions.

The Indian retail sector - a $270bn business growing - is dominated by small "mom and pop" outlets fearful of the threat of growing competition from the likes of Reliance.

The Reliance source admitted it would "take some time" to convince smaller traders that the expansion of the organised retail sector would not necessarily mean they would be run out of business.

"There is the fear of the unknown," the source said, who added that in some states, Reliance had managed to convince local authorities of the economic benefits of the growth of organised retail.