The Government may have gained brownie points with the notification of foreign direct investment (FDI) in retail, but the real challenge is to make the investments viable and an attractive proposition, said Samar S Shekhawat, Senior Vice-President, United Breweries.

Speaking to Business Line , he said that the FDI policy looks good at the outset, but more needs to be done given the opposition and regulatory hurdles.

“The decision to allow FDI in retail, which comes after a delay of at least 10 years, has now been left to the mercy of State Governments. If I remember correctly one has to take at least 37 licences to start a retail store in India,” he added.

Land availability

Besides bureaucratic hurdles, availability of land is a major issue. Even if land is made available, the cost will play a major role as retail is a low margin, high volume business, he said.

The upshot, according to Shekhawat, is if a Walmart, Carrefour or Tesco comes in with investment and the State government does not allow them, they could go to Court and the State Government’s decision would be turned down, as it is now a law notified by the Union Government.

If the State governments give permission, he added, the UB Group intends to set up its own branded shops. Currently, the company has a retail outlet at Safdarjung Enclave in Delhi.

Asked about the negative publicity surrounding Kingfisher Airlines and whether it would affect the Group’s liquor business, Shekhawat said both the companies have different business interest and customer base.

“Kingfisher is a 40-year-old beer brand, while the airline is 8-9 years old. I am confident that Kingfisher is a strong beer brand and can withstand the current happenings in the airline business,” he said.

On the spirits business, he said that beer demand growth appeared to have revived after a sharp slump witnessed last year.

The mild, wet summer and the sharp increase in prices on the back of State Governments hiking taxes have led to demand growing by three to four per cent, he said.

Around 60 per cent of alcohol prices are controlled by the Government, which fixes both the higher and lower limit of the retail price. “We can derive profit only by driving more efficiency, higher capacity utilisation and keeping a check on our cost,” he said.

> suresh.iyengar@thehindu.co.in

Related Topics