A committee of secretaries (CoS) has recommended 51% foreign direct investment (FDI) in multi-brand retail, albeit with some stiff riders, paving the way for the entry of some of the world’s biggest retailers such as Wal-Mart, Carrefour and Tesco to set up shop. The decision still needs to go to the Cabinet Committee on Economic Affairs for the next step to be taken. The Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India (“DIPP”) is, about to approach the cabinet secretariat with a roadmap for permitting Foreign Direct Investment (“FDI”) in multi-brand retail. Given the sensitivity, intense debate and difference of opinion on the issue of permitting FDI in multi-brand retail and is in favour of liberalisation of the sector in a stepwise manner. The DIPP is expected to propose as under:
• FDI in multi-brand retail be limited to a maximum of 51%
• Minimum FDI in any multi-brand retail venture should be USD 100 million
• 50% of the FDI in any multi-brand venture be invested and deployed in development of back end infrastructure
• Multi-brand retailers be required to source at least 30% of their products, including food items, from small and medium scale enterprises
• Multi-brand retailers also be required to sell at least 30% of their products to small retailers
• Post FDI, multi-brand retailers file periodic statements and reports with the Government showing compliance with the prescribed conditions
• The number of outlets in big cities be capped and
• The State Governments to have a final say in whether or not to permit FDI funded multi-brand retail outfits in their respective state(s).
The inter-ministerial group (IMG) on inflation, set up by the prime minister, has also given its blessings, saying FDI in multi-brand retail will help control rising prices and reducing inflation.
Planning Commission deputy chairman Montek Singh Ahluwalia spoke in favour of opening up the multi-brand retail sector to foreign direct investment (FDI), saying it will benefit farmers and also help contain food inflation.
The Planning Commission supports FDI in (multi-brand) retail. Farmers will benefit from modern retail marketing. No doubt that modern retail marketing is good.
The commerce ministry — which is responsible for FDI policy — recently floated a concept paper on permitting foreign investment in the politically sensitive multi-brand retail sector.
At present, 51 per cent FDI is permitted in single brand retail, while 100 percent is allowed in the wholesale cash-and-carry segment.
As per government estimates, India sees wastage of perishable food and vegetable items worth Rs 1 lakh crore annually due to the lack of proper storage and food processing facilities.
Left parties and trade unions believe the rise in prices of food articles is mainly due to futures trading in agri-commodities and have asked the government to completely ban the practice.
