NEW DELHI: The government is likely to allow full foreign ownership in single-brand retail stores, even as it may introduce some riders to avoid a repeat of the furore over its twin proposal to permit the entry of multi-brand global retailers into the country.
An official told ET that while the government had announced suspension of its move to ease foreign direct investment norms in multi-brand retail, it is pressing ahead with its decision to remove the cap on foreign ownership in single-brand stores.
"The statement in Parliament is very clear and there was no mention of linking it to FDI into single-brand sector," the official said, referring to Finance Minister Pranab Mukherjee's statement in the Lok Sabha earlier on Wednesday.
"The decision to permit 51% FDI in multi-brand retail will be suspended till a consensus is developed through consultations with various stakeholders," the minister had said after the all-party meeting that had been called to break the logjam in parliament.
The department of industrial policy and promotion, or DIPP, is already finalising the press note to give effect to the November 25 cabinet decision to remove the cap of 51% foreign direct investment in single-brand retail, the official said.
This will allow foreign retailers such as Marks & Spencer and Zara complete ownership of their Indian stores, besides facilitating the entry of others like Ikea and Gap that have been reluctant to form partnerships with domestic retailers to set up stores in the country.
However, the official added, the government may introduce some riders to avoid repeat of the furore over easing of norms in multi-brand retail. "Some changes may be incorporated to avoid opposition of any kind. We do not want a repeat of the multi-brand fiasco," the official said.
These riders may be in addition to the stringent conditions already approved by the cabinet. Foreign investors are already required to own the brand they intend to retail, the brand must be present in other countries and the retailer must source 30% of the products to be retailed from small industry.
The final policy may increase the local sourcing requirement from the current 30%, while specifying that the condition will not apply to high-tech goods that small industry cannot manufacture.
The government has defined micro and small enterprises as those which have assets of less than 5 crore.
"There is no study to show how much domestic big retailers source from the Indian market," said Anil Bhardwaj, secretary-general, Federation of Micro, Small and Medium Enterprises, adding, "It could be as high as 70% for all we know and, if that is true, then the 30% requirement is very low."
According to government data, many foreign firms had opted to stay out due to the 51% cap on ownership, which probably explains why just 196 crore has come in as FDI in the sector over the past three-and-a-half years.
While multi-brand retailers such as Walmart and Carrefour will have to wait before they get access to India's $400 billion plus organised retail market, the government hopes the provision of full ownership in single-brand retail will bring in much-needed foreign investment.
Source : economictimes.indiatimes.com