The foreign direct investment policy for multi-brand retail is set for a rough ride in Parliament on Thursday when the amendments to the Foreign Exchange Management Act (FEMA), needed to make the rules legally valid, come up for discussion in the Rajya Sabha.

The policy, which allows 51 per cent FDI in the multi-brand retail sector subject to sourcing and investment conditions, was approved by the Cabinet last September. While the Lok Sabha had approved the policy and the required amendments to FEMA (although there are still certain amendments from Opposition members to be discussed), the Rajya Sabha is yet to give its nod.

CPI(M) leader Sitaram Yechury, who had moved a motion against the FEMA amendment, will explain his reasons for doing so to the Rajya Sabha on Thursday following which the motion may be put up for voting. Critics fear that allowing large retail stores with dedicated low cost supply chains will lead to job losses, loss of business for the small industry and closing down of neighbourhood ‘mom-n-pop’ stores.

“It has to be voted in Rajya Sabha. The Government is in a minority on the decision to allow FDI in multi-brand retail,” Yechury told Business Line .

No foreign multi-brand retail company, including Walmart and Tesco that had initially shown great enthusiasm in setting up shop in the country, has submitted proposals yet as they are waiting for all policy clearances to come through, a DIPP official said. Opposition parties are having discussions among themselves and with the Samajwadi Party and the Bahujan Samaj Party for forging a common stand on the amendments.

Interestingly, while the SP and the BSP had opposed the policy allowing FDI in multi-brand retail, both had walked out when the policy was being voted in the Lok Sabha, thus allowing it to be approved.

Commerce and Industry Minister Anand Sharma, whose Ministry was instrumental in formulating the policy for multi-brand retail, is expected to intervene on the statutory motion and outline the benefits of the policy. He is expected to give assurances that the policy will not lead to job losses, as was being feared and would lead to the creation of back-end infrastructure in the country.

“One has to see if voting actually happens and if it does, what happens to the future of the FDI policy for multi-brand retail,” the DIPP official said.

This would be just the first bridge to cross for the multi-brand retail FDI policy. The fresh amendments made to the multi-brand retail policy recently to attract elusive investors will also require amendments to FEMA. Opposition parties including the Left parties have already said they would oppose the new rules in Parliament as they were in breach of what had been projected to them earlier.

The new FDI rules have eased compulsory sourcing norms from the small sector, exempted foreign retailers from investing in back-end infrastructure beyond the first tranche of investments brought in and allowed stores to come up even in small cities.

amiti.sen@thehindu.co.in

jigeesh.am@thehindu.co.in

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