Cabinet Note Soon On Allowing 51% FDI in Multi-Brand Retail.

NEW DELHI: The department of industrial policy and promotion will soon float a cabinet note for allowing up to 51% foreign direct investment (FDI) in multi-brand retail after an informal group of ministries that have issues with some of the proposal gives its recommendations. The ministries that have an issue include the ministry of micro, small and medium enterprises and the food processing ministry.

"The cabinet note will be circulated soon," an official of Department of Industrial policy and Promotion, or DIPP, told ET adding that concerns of these ministries will be included. The committee of secretaries, or CoS, had given its in-principle nod to FDI in multi brand retail on July 22. The CoS asked the DIPP to rework the condition of 30% of domestic sourcing as it was found to be in breach of World Trade Organisation norms. The informal group will look at an alternative to such a condition, which would be incorporated in the cabinet note.

The CoS, however, had turned down the condition that at least 30% of turnover of these ventures should be from sales to small traders through wholesale cash and carry set up. The DIPP is now likely to move a proposal for cabinet's approval allowing 51% FDI in multi-brand retail subject to a minimum investment of $100 million. However, state governments will have the final say in allowing retail stores in their state.

Moreover, stores will be allowed only in large cities with a population of more than 10 lakh. At least 50% of the investment made by the foreign retailers will have to be in the backend infrastructure but retailers will not be required to file a statement of accounts with the Reserve Bank of India or the Foreign Investments Promotion Board, as proposed in the DIPP's original proposal to the CoS. Both, the RBI and the FIPB had favoured that the condition be dropped.

The lack of cold chains in the country leads to wastage of about 40% of the farm produce, causing a loss of about Rs 50,000 crore annually, according to industry estimates. Multinational retailers have been lobbying for entry into the country's $600-billion and fast expanding retail industry, but critics, including the Left and the BJP, believe organised retailers will hurt the livelihood of small shopkeepers and traders. India, at present, allows 51% FDI in single-brand retail and 100% in wholesale cash and carry.

Source : economictimes.indiatimes.com