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Updated: January 19, 2011 00:01 IST

Cabinet to consider 51 p.c. FDI in multi-brand retail

Sujay Mehdudia
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Union Minister for Commerce and Industry Anand Sharma during a press conference on FDI in New Delhi. File Photo
PTI Union Minister for Commerce and Industry Anand Sharma during a press conference on FDI in New Delhi. File Photo

With the recent uproar on rising food and vegetables prices providing a handy trigger, the Manmohan Singh Government is all set to give its approval to 51 per cent Foreign Direct Investment (FDI) in the multi-brand retail sector with the Commerce and Industry Ministry likely to move a Cabinet note next week.

Highly placed sources in the Ministry said the move to open up the multi-brand retail sector, a politically sensitive issue, comes following “feedback” received from State governments which have argued that allowing foreign investment in retail would improve the required infrastructure and provide a remunerative price to farmers for their produce.

What has also emboldened the Centre is that the Narendra Modi Government in Gujarat and the Akali-BJP alliance Government in Punjab are in favour of opening up the sector despite the BJP's opposition to this policy at the national level.

“We have firmed up our views on the issue and are likely to move a Cabinet note later this week or early next week proposing allowing of 51 per cent FDI in multi-brand retail,” a senior official explained to The Hindu. “The note will be sent to various Ministries for their comments and then the Cabinet Committee on Economic Affairs will be moved for a policy decision. We are hoping the matter will form part of the budget announcements as the Finance Ministry as well as the Agriculture and Food Distribution and Consumers Affairs Ministries are strongly backing such a move.”

The Government is proposing some safeguards to ensure that non-serious players and fly-by-night operators are not entertained. To this end, any player who seeks entry into the Indian market will be required to invest a minimum of Rs. 500 crore. The Government is also seeking certain other investment commitments, including establishing backend cold chain outlets.

Concept paper

Last year, Prime Minister Manmohan Singh sought a debate on opening up the sector, pointing to the vast difference between farmgate and consumer prices. The Department of Industrial Policy and Promotion, under the Ministry of Commerce and Industry, floated a concept paper inviting comments from various stakeholders on allowing FDI in multi-brand retail.

Later, a committee was constituted under the Ministry of Consumer Affairs and Public Distribution, which has prepared a draft report after taking into consideration the concerns and viewpoints of all stakeholders concerned, officials said.

Though 100 per cent FDI is permitted in cold chain through the automatic route in the absence of FDI in retail, the flow of such funds to the sector has been insignificant. The present FDI regime allows 51 per cent foreign investment in single brand retail and 100 per cent in wholesale cash and carry.

The Ministry of Consumer Affairs and Public Distribution initially suggested a cap of 49 per cent FDI in multi-brand retail, while the Micro, Small and Medium Enterprises Ministry's recommendation is for 18 per cent FDI. But the recent skyrocketing of food prices — especially those of onions — and the declining inflow of FDI have opened a door for the Government to take a more ambitious decision on the prickly issue.

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Why is the hue and cry of something new? How many of us knew (what is) this system? If you don't know or don't have experience about something, how can you be sure that it is totally destructive to Indian economy?. Multi-brand retail outlets will bring new culture in consumerism, it will be beneficial to farmers in multi level, consumers are dampened against rampant price fluctuation. this will benefit Indian customers in many ways in coming days. FDI will help to introduce quality product from differed regions which enable the customer with better product education wide selections.

from:  Varghese.Al
Posted on: Jan 19, 2011 at 17:12 IST

Plainly, a falsehood, packaged in a neat anti-price tool that is sedulously propagated by the interested sectors, especially the planners, the Krishi Bhavan and the opinion-makers is the opening of the retail trade to 51% equity participation. This is a step that will give to foreign interests on a platter our retail trade and will act against the people. Enough has been pointed out by the western world disgusted with the supermarket phenomenon that has afflicted their countries. So far there has been limited entry of western supermarkets into India. Now the flood gates are sought to be opened. Even in the recent onion racket, it is the middlemen and traders who made a killing and not the grower with the government remaining a passive onlooker. In a well documented research work "Food Wars", its author has quoted a research finding to burst the myth of supermarkets. Extracts: "Of every retail price for Ecuadorian bananas, the plantation worker receives just 1.5 pence, whereas the plantation owner receives 10 pence, the trading company 31 pence, the ripener/distributor 17 pence, and the final retailer (that is the supermarkets) 40 pence. For the 40 pound box of Costa Rican bananas sold in the UK supermarket for the equivalent of 14.69 pounds, the grower would have received a maximum of 2.2 pounds, only 15% of the resale value." The state of affairs in India would be more atrocious. It is further shocking to note that just because the Gujarat government under BJP are opening out in this direction, the central government is desirous of following such a policy. It is a ridiculous example of blindly copy-cat competitive politics. With the list given to our government not only by President Obama and echoed by the American business interests at the last meeting of the Indo-US Business Council and reminded every now and then, you can expect not only this step but also several more tailored more to furthering the American business interests than catering to the betterment and prosperity of our own sectors, Indian business, Indian grower and worker. This is the fate that awaits us for the remaining years of the UPA rule.

from:  S. Subramanyan
Posted on: Jan 19, 2011 at 08:51 IST

This will be fatal to Indian merchants.

from:  chandu
Posted on: Jan 19, 2011 at 07:16 IST

It is indeed disheartening that such an option of FDI in retail should be considered, when checks and balances are not in place. While we move ahead with this crass commercialization, Anand Sharma cannot forget that people are noting him and his exploitative team for their lack of perspective. When this plan doesnt work in favour of the consumer and the farmer, then what is plan B? This optimism is totally unjustified, and justifying it with 'better remuneration to farmers' is completely UTOPIAN.

from:  Abraham
Posted on: Jan 19, 2011 at 07:11 IST

A welcome sign of expanding our thinking and consequently creating opportunities in multiple sectors of production, storage, transportation and increasing availability of goods and produce. I would imagine that such a move will also generate numerous incentives to people involved.

from:  Giri Girishankar
Posted on: Jan 19, 2011 at 05:44 IST

Will measures be taken to safeguard national interests and local industries? Else we might end up like big box marts in USA importing most of the stuff from China?

from:  Prasanna
Posted on: Jan 19, 2011 at 05:43 IST

One more way for MNC's to loot Indian consumers especially the middle class!! This is certainly not the solution to this problem!

from:  Venky
Posted on: Jan 19, 2011 at 04:24 IST

FDI into Multi brand retail will destroy India - Indian cannot be Global Citizen. Today India already has foreign debt {US$ 79 Billion} + trade deficit {US $ 100 billion}+ current account deficit + FDI {US$ 40 billion} + FII {US$ 100 billion} = approx 350 US$ billion and more. This means almost all resources and transactions in India are owned or financed by Foreign Nations especially Indian Economy is completely weakened to Foreign Currency influence that kills Indian Rupee. When Rupee value is killed globally that kills every one of us which is in front of our eyes today. Rising Commodity Prices, Rising Fuel Prices and Rising Debts in every one of our lives. FDI in retail may bring in investment which will have the following impacts. 1. Large real estate prices. 2. Indian small and medium Manufacturing sector is already dented by China Products which will further hurt due to allowance of FDI into retail. 3. Indian Current retail chains are already failed in their profitability. 4. Indian Current retail chains are looking for RELIEF activities due to heavy losses. This will have very big negative blow on the life of every Indian. Investment requirement is bulging and Indian loosing his investment capability. Political Parties must react.Every body thinks that Politicians are working against the nation but the fact is the Bureaucrats are working like workers for foreign investments and bribe money.I am not against investments. I want to have those investments by Indian and the success should be from Indian. Today Indians are not Global Citizens. Indian is being deprived globally by means of Globalization, finances and immigration.

from:  Ekambar Rao Kodali
Posted on: Jan 19, 2011 at 02:05 IST
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