Govt To Open FDI In Retail From April '12 .

The government is likely to permit foreign direct investment (FDI) in the multi-brand retail sector from April 2012 and is expected to come up with a final draft of a proposal in this regard by the end of July.

This would come as a big relief to global retailers who have been waiting in the wings for years to move into India's multi-brand retail sector, which according to a Boston Consulting Group (BCG) study is estimated to be worth $28 billion (Rs 125,000 crore). "The government has already prepared a draft which says 49 per cent FDI in multibrand retail will be allowed in a phased manner. It will be effective from the next financial year," a senior official of the commerce ministry told Mail Today.

"The finer details of the draft and any inter-ministerial differences will be sorted out after the meeting of the Committee of Secretaries next week," the official said. The Committee of Secretaries (CoS) headed by Cabinet secretary Ajit Kumar Seth is likely to meet on July 22 to finalise the blueprint of the proposal for political clearance. One of the major issues to be discussed is whether the cap on FDI should be 49 per cent or be increased to 51 per cent.

"The draft is as per the recommendations by the economic advisor to the Prime Minister, Kaushik Basu. Initially, the proposed cap on FDI will be 49 per cent. Later, it may be extended to 51 per cent," the official added. According to the official, the government will allow FDI in three phases. In the first phase, foreign multi-brand retail chains will be allowed in the metros Delhi, Mumbai, Kolkata and Chennai. In the second phase other metros like Bangalore, Hyderabad and Pune will be included.

The draft has laid out strict norms such as earmarking 40 per cent investment for backend infrastructure, such as cold storage, soil testing labs and seed farming, for prospective entrants.

With the Committee of Secretaries (CoS) set to meet next week to finalise the draft proposal, business chambers are lobbying hard to address opposition from political parties. According to sources, the Federation of Indian Chambers of Commerce and Industry (Ficci) and the Confederation of Indian Industry (CII), have already initiated meetings with leaders from the BJP and CPI in this regard. Opposition parties have made it clear that they will oppose the move inside and outside Parliament. The monsoon session of Parliament will begin on August 1.

The BJP said it would oppose the move in every forum. "We're not for FDI retail. We believe that in the long run this move is going to harm self-employment opportunities. FDI in retail will also adversely affect the manufacturing sector. We will oppose it in Parliament and other forums," Opposition leader in the Rajya Sabha Arun Jaitley said.

The Left parties, SP and RJD are also opposed to the decision. The CPM said that after failing to curb the increase in prices of essential commodities, the Centre is trying to push for more concessions to multinational companies like Wal-Mart. The SP had also condemned the move. The political resolution adopted by the party in a recent meeting said that FDI in retail will harm small traders across the country.

Earlier in 2009, the Parliamentary standing committee on commerce had submitted a report against FDI in retail. It had recommended a blanket ban on domestic corporate heavyweights and foreign retailers from entering the retail trade in grocery, fruits and vegetables, and restrictions imposed on opening large malls by them for selling other consumer products.

Source : businesstoday.intoday.in