Cabinet Likely To Approve FDI in Multi-Brand Retail .

Seeking to tap the vast foreign direct investment (FDI) for developing infrastructure, the Government is likely to give a go ahead to 51 per cent FDI in multi-brand retail after the conclusion of the Parliament session, although with a changed definition of back-end infrastructure investment.

The Government has already started working on a Cabinet note for permitting 51 per cent FDI in multi-brand retail and the exercise is in the final stages. The Cabinet note, being prepared by the Industry Ministry led by Department of Industrial Policy and Promotion (DIPP) is basically based on the recommendations of the Committee of Secretaries (CoS).

“We are in the final stages of putting in place a Cabinet note for the consideration of the Union Cabinet. We are working at a fast pace to ensure that investment momentum remains upbeat. The massive investment of funds required in the rural belt and the back-end infrastructure will form the basis of the FDI permission for multi-brand retail,” a senior Ministry official remarked.

Union Commerce and Industry Minister, Anand Sharma, said the Parliament was in session and he was not in a position to discuss anything pertaining to such policy decisions. “We are aware of the global economic climate and need for India to grab the opportunities coming its way. We will keep the sensitivities of all sections in mind whenever any policy is framed in future,'' Mr. Sharma remarked.

On its part, the DIPP has decided to include three new areas as part of back-end infrastructure investment. The new areas of investment are design improvement, quality control and packaging of products. The move will provide foreign retailers greater flexibility in structuring their India investments in the sector.

The CoS, while giving its nod for up to 51 per cent FDI in multi-brand retail had recommended that at least 50 per cent investment has to mandatory in back-end infrastructure. The minimum investment required would be $100 million.

Discussions are also on to provide more flexibility to foreign retailers, including that investment in back-end infrastructure not necessarily be undertaken by the company making foreign direct investment.

The Department of Consumer Affairs had wanted that 75 per cent investment be in back-end infrastructure instead of 50 per cent. It suggested FDI in working capital not be allowed. However, this contention was rejected by the DIPP terming it as unreasonable.

The Reserve Bank of India had argued that under the existing working conditions, data of investments were collected only for balance of payments purposes and post-investment monitoring was not undertaken. Thus, RBI would be in no position to monitor compliance of back-end investment conditions.

Therefore, it was decided foreign companies must self-certify compliance with the condition and keep records the government could check, if necessary.

Source : thehindu.com