SECRETARIES PANEL APPROVES TOUGH RIDERS FOR RETAIL FDI

Emerging consensus is that all state capitals be covered

NAYANIMA BASU & SURAJEET DAS GUPTA New Delhi, 31 July

he Union governments committee of secretaries (CoS) on foreign direct investment (FDI) in multi-brand retail has put a number of tough conditions. The CoS had earlier approved in principle the proposal to allow up to 51 per cent FDI in the sector. Now, the conditions it has decided include minimum investment, limiting the presence of foreign retailers to a few cities and wide powers to state governments to decide if they want to allow such stores. There are also clauses to protect small-scale enterprises and local shops. The panel will now prepare a note for clearance by the Cabinet Committee on Economic Affairs, the final decision-making body on this issue. A top official in the Department of Industrial Policy & Promotion (Dipp), which spearheaded the changes at the CoS, said: Most of the points we listed as conditions have been accepted by the CoS. Another Dipp official said the only contentious issue was whether the cap should be 49 per cent or 51 per cent. This issue was resolved as the finance ministry was of the opinion that it should be the same as for singlebrand retail, he said. Dipp had suggested a minimum FDI of $100 million (`450 crore). It said foreign retail outlets should be allowed only in cities with more than a million people, based on the 2011 census. There are 35 such cities according to the 2001 census. The number in the 2011 census will be more. The consensus now emerging is that at least all state capitals be covered, if not cities with over a million people. Earlier, some ministers wanted to start with the top six cities based on population.

STIFF CONDITIONS
Foreign retailer making the investment can commission a separate entity to invest in back-end support by outsourcing the task. Investing at least 50% of the FDI in backend infrastructure should be mandatory 30% sales turnover will have to come from small traders The retailers will have to source at least 30% manufactured items in value terms from small and medium enterprises

Global players not too keen

Top international retail chains are lukewarm to the likely opening of multi-brand retail to FDI. Many global chains have told Business Standard that India is not on their horizon yet. Report on Page 2 The CoS has also approved a recommendation that 30 per cent sales turnover will have to come from small traders, either directly or through wholesale cash & carry units. The retailers would also be required to source at least 30 per cent manufactured items in value terms from small and medium enterprises, it said. Turn to Page 17

OTHER RIDERS
Another significant move is investment in backend infrastructure. The CoS has recommended that a foreign retailer making the investment can commission a separate entity to invest in backend support by outsourcing the task. However, investing at least 50 per cent of the FDI in backend infrastructure should be mandatory, it said.