The food supply chain sector will not get the desired foreign investments unless foreign direct investment (FDI) is allowed in multi-brand retail and rigid conditions removed, according to a report by research body ICRIER and D&B Tangram.

“It is important for the government to know that global retailers cannot change their business models to meet the conditions imposed on FDI in retail. As India competes with other countries to get FDI it should also have similar FDI policies. The retail policy should not impose restrictions on store and non-store retail formats,” the report on ‘India-UK collaborations and investments in food supply chain — opportunities and challenges’ released on Wednesday said.

Some of the UK-based food manufacturers have or are planning to set up manufacturing hubs in the ASEAN countries such as Thailand and export the products to India at low import duties through the ASEAN free trade agreement (FTA), the report cautioned.

Finance Minister Arun Jaitley announced the Centre’s intention to allow FDI in the food processing sector earlier this year, but it would be subject to the condition that a company source all its inputs locally.

The BJP-government is, so far, opposed to allowing FDI in multi-brand retail, while 100 per cent FDI is allowed in single-brand retail subject to domestic sourcing conditions.

For the food supply sector, taxation is a major concern. “Rolling out of the Goods & Services Tax (GST) is further expected to drive technology adoption since the hub-and-spoke model technology will be of paramount importance,” the report points out.

It suggested that if GST does not happen due to the lack of a majority in the Upper House of Parliament, the Centre could work with the states in which it has a majority, such as Gujarat, Rajasthan, Haryana and Maharashtra, to establish green channels. This will significantly benefit movement of perishable produce and reduce wastage.

The study focuses on five areas of the food supply chain — storage and warehousing, cold-chains, packaging technology, skill development and R&D. Food and drink is a priority sector for the UK government in its trade and investment with India. The report charts out clear action points for UK Trade & Invest (UKTI) and the UK India Business Council (UKIBC) to increase awareness and market understanding of UK companies and to work collaboratively with the Centre and state governments in India to enhance India-UK trade and investment in the food supply chain.

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