Mandatory FDI in retail back-end may apply only for first tranche

In what could be a big relief for foreign retailers,the commerce ministry is of the view that in the multi-brand retail

Written by Shruti Srivastava | New Delhi | Published: June 27, 2013 3:20 am

In what could be a big relief for foreign retailers,the commerce ministry is of the view that in the multi-brand retail sector,50 per cent FDI in back-end infrastructure should be mandatory only for the “first tranche” of such amount. A Cabinet note clarifying this is expected soon,an official told The Indian Express.

The global retailers will not have to invest mandatorily in the back-end when they bring in the next tranche. The minimum FDI to be brought in multi-brand retail is $100 million as per the policy.

This would spell major relief for retail hopefuls who have though been keen to enter the multi-brand retail segment in India but have been apprehensive about the policy. Major global retailers including Tesco,Carrefour and Walmart had earlier written to commerce and industry minister Anand Sharma seeking clarity on issues including the mandatory investment in back-end infrastructure and 30 per cent sourcing from small industry.

Early during the month,the department of industrial policy and promotion had come out with clarifications on some of the issues. It had clarified that the mandatory back-end investment would include only greenfield projects. However,clarifications including sourcing restriction among ‘group companies’,and requirement of 50 per cent investment in back-end within three years of first FDI tranche were not issued.

“The earlier clarifications didn’t require Cabinet approval. However,clarifications on these issues would require its approval. The Cabinet note will most probably be sent this week,” the official added.

Also,the DIPP is likely to allow foreign retailers a period of three years to switch from one small and medium enterprise (SME) to another,after it outgrows the $1 million limit.

The retailers had asked the government to clarify the policy in case of mandatory 30 per cent sourcing from ‘small industry’.

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