Bandh day: Govt puts retail FDI in effect

On the very day half of India was paralysed by anti-retail FDI bandh,govt made it official.

Written by Agencies | New Delhi | Published:September 20, 2012 9:46 pm

Showing resolve for reforms,the government today notified its decision to allow global retail giants like Walmart to open stores in India,on a day several political parties called Bharat Bandh to protest against the policy.

With this notification,multinational retailers can invest up to 51 per cent to open stores in 10 states and Uts which,till date,have agreed to implement the decision.

“51 per cent FDI in multi-brand retailing,in all products,will be permitted …,” a notification by the Department of Industrial Policy and Promotion (DIPP) said. It said the decision will take immediate effect.

The DIPP also operationalised September 14 Cabinet decisions to relax the sourcing norms for foreign retailers investing beyond 51 per cent in single-brand retail and allow 49 per cent FDI by foreign airlines in the domestic carriers.

Besides,the decisions on permitting 49 per cent FDI in power exchanges and increase in foreign equity cap from 49 per cent to 74 per cent in the service providers like DTH in broadcasting sector have also been notified.

In the most controversial area of FDI in multi-brand,the the DIPP said the State Governments and UTs would be free to take their own decisions.

“Therefore,retail sales outlets may be set up in those StatesUTs which have agreed,or agree in future,to allow FDI in MBRT (multi-brand retail trading) under this policy”.

Minimum amount to be brought in by the foreign investor would be USD 100 million and outlets may be set up only in cities with a population of more than 10 lakh.

At least 50 per cent of FDI should be invested in ‘back-end infrastructure’ within three years of the first tranche.

To protest against the government’s decision,NDA,Left and SP called Bharat Bandh. The parties were also protesting against the diesel price hike and cap on subsidised LPG.

While the government had taken the decision to open the multi-brand retail sector in November last year,it could not implement the same in the face of stiff opposition from its ally Trinamool Congress.

Only 10 states and UTs have so far conveyed to the Centre their agreement to open FDI in the multi-brand retail. These are,Andhra Pradesh,Assam,Delhi,Haryana,Jammu & Kashmir,Maharashtra,Manipur,Rajasthan,Uttarakhand,Daman & Diu and Dadra and Nagar Haveli.

The major domestic retailers welcomed the decision. Future Group CEO Kishore Biyani said “Finally FDI is here. So that is a very good news. There is no threat to us from foreign retailers.”

Aditya Birla Group,Business Director (Apparel & Retail Business) Pranab Barua said,”We have to still wait and watch what happens at the state level. This will help the sector.”

The DIPP notification further said companies with FDI in multi-brand retail will not be allowed online trading.

FDI will also not be allowed in lottery business,chit funds,manufacturing of cigars and cigarettes and transport (other than Mass Rapid Transport Systems).

At least 30 per cent of the value of procurement of manufactured and processed products should be sourced from ‘small industries’ which have a total investment in plant and machinery not exceeding USD 1 million,the DIPP said.

At present Walmart has a 50:50 cash and carry joint venture with Bharti Group,while Carrefour runs wholesale stores. Tesco,on the other hand has a tie-up with the Tata group and supports the Indian firm in the running of Star Bazaar chain of retail outlets.

Diluting the earlier norms in the single-brand retail,the DIPP said the 30 per cent sourcing by the global firms “will be done from India,preferably from MSMEs,village and cottage industries,artisans and craftsmen,in all sectors”.

Swedish retailer IKEA,which planned to invest Rs 10,500 crore in India,had sought relaxations in this regard.

India Inc hails implementation of FDI in retail

Hailing the Centre’s decision to implement FDI in multi-brand retail,the industry today said this will give a strong message to investors that the government means business and stands firm on its initiatives.

Industry body Assocham complimented the government on its firm decision on economic reforms.

“This will give a strong message to investors inside as well as outside the country that the government means business,” Assocham Secretary General D S Rawat said.

The politicians must distinguish between politics and economics in the interest of the country. Though not much investments will be flowing from investors immediately but the message it carried is huge,he added.

The government today notified FDI in multi-brand retail operationalising the Cabinet decision.

The Department of Industrial Policy and Promotion also operationalised September 14 Cabinet decisions to relax the sourcing norms for foreign retailers investing beyond 51 per cent in single-brand retail and allow 49 per cent FDI by foreign airlines in the domestic carriers.

Besides,the decisions on permitting 49 per cent FDI in power exchanges and increase in foreign equity cap from 49 per cent to 74 per cent in the service providers like DTH in broadcasting sector have also been notified.

The development comes on a day when a nation-wide bandh was called by BJP,Left parties and UPA’s outside supporter SP to protest diesel price hike and FDI in multi-brand retail evoked mixed response with life and trade being disrupted in some states.

CII said it is important to stay on track on reforms.

“The entire decision on multi-brand retail will go a long-way in capital infusion in the country and also leads to strengthening of linkages including benefits to farmers,” CII Director General Chandrajit Banerjee said.

This is an important reform for India for both growth and development,he added.

PM likely to give message to nation on FDI tomorrow

Against the backdrop of widespread uproar over decision on FDI,Prime Minister Manmohan Singh is likely to explain to the nation tomorrow the reason behind the step and the benefits it would entail.

The Prime Minister’s explanation could be in the form of a written message or a televised address,sources said.

Singh is expected to spell out the reasons that prompted the government to allow FDI in multi-brand retail.

He is likely to cite the difficult times facing the economy and emphasise that the step was aimed at pushing economic growth and generating employment.

The thrust of the Prime Minister’s message is expected to be that the step was taken in national interest.

After the Cabinet decision on September 14,Singh had said the step was intended to “bolster economic growth and make India a more attractive destination” for foreign investment.

“I believe that these steps will help strengthen our growth process and generate employment in these difficult times,” he had said and sought support of “all segments of public opinion” for this.

The decision to go ahead with FDI in multi-brand retail has evoked angry reactions from Trinamool Congress which is going to quit the UPA government tomorrow.

UPA’s outside allies like Samajwadi Party and JD-S as well as opposition parties are also agitated over the decision and organised nationwide agitations today.

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