Multi-brand retail: Keep FDI riders to minimum, says PM's advisory panel

Go for a straight-forward approach to foreign direct investment (FDI) in multi-brand retail with a ‘satisfactory' limit. This is believed to be the advice given by the Prime Minister's Economic Advisory Council (PMEAC) to the Government.

The Council's view is significant as it comes ahead of the Committee of Secretaries (CoS) meeting on Friday.

Highly-placed sources told

Business Line that though the PMEAC has not stated a clear FDI limit in multi-brand retail, and is said to be in favour of an open mind on the issue.

There is no consensus over the limit within the Government. The Department of Industrial Policy and Promotion (DIPP) wants 51 per cent equity participation for the foreign partner, while the Consumer Affairs Ministry is for a 49 per cent cap. Now, the CoS will have the final word.

Also, the PMEAC is said to be averse to too many riders for FDI in the sector. The more the number of riders, the more the possibility of foreign investors opting out, it feels.

A senior government official, familiar with the developments, said the PMEAC's suggestion was, “If some thing can't be done, it should not be done”.

Key conditions

Three key conditions have been proposed after the discussion paper released by DIPP and subsequent consultations with various Ministries and stakeholders. One, foreign investors need to invest at least 50 per cent in back-end infrastructure such as warehousing.

Two, at least 30 per cent procurement of manufacturing products should be done from micro, small and medium enterprises.

The third condition relates to allowing multi-brand retail with FDI only in cities where the population is over one million.

Sources said the PMEAC's advice is likely to defuse the differences between DIPP and the Consumer Affairs Ministry.

As soon as the CoS finalises the draft, the DIPP will have to start the process of getting Cabinet approval.

Industry for clear view

Meanwhile, industry players are awaiting a clear view from the Government on the issue.

“We want the Government to take a quick decision, even if there are one or two riders. Imposing a cap on sourcing from local suppliers is a good one,” said Mr Rajiv Kumar, Secretary General, Federation of Indian Chambers of Commerce and Industries.

FDI was allowed in single brand retail from February 2006. Over the past five years, nearly 55 foreign investors have invested over $100 million in the sector.

shishir.s@thehindu.co.in