Retail shares take a hit as Govt hints at holding back FDI move

Our Bureau Updated - December 26, 2011 at 06:53 PM.

Retail shares table

Retail firms' shares plunged as the Government all but admitted that it is putting its decision to allow foreign direct investment (FDI) in multi-brand retail on hold.

Although no official statement has been forthcoming, the UPA Government's principal political trouble-shooter and Finance Minister, Mr Pranab Mukherjee, on Monday indicated that the Government was willing to put on hold its decision on FDI in multi-brand retail, but that a roll-back was out of question.

The Opposition, which has stalled Parliament over the issue since the start of the winter session, also stuck to its guns and said it would not settle for anything but a roll-back.

There are two ways of holding back a Cabinet decision. One, the Cabinet could reconsider the decision and put it in abeyance. Two, the notification for implementation of the decision may not be issued, which will effectively mean that the decision does not become part of policy.

There is no recent example of a Cabinet decision being put on hold, but one Act which was passed by Parliament — Benami Transactions (Prohibition) Act, 1988 — was put on hold by not notifying the rules. This year, the Cabinet cleared the new Benami Act and the Government introduced it in Parliament.

An official announcement on the Government's decision is expected only on December 7, when Parliament reassembles after a long break. The impasse on the issue has resulted in a total wash-out of the first nine sittings of both Houses of Parliament.

Hopes of an end to the logjam had brightened on Saturday when Trinamool Congress leader and West Bengal Chief Minister, Ms Mamata Banejee, announced that the Finance Minister, Mr Pranab Mukherjee, had assured her over the phone that the FDI decision would be put on hold.

But, the key Opposition party, the BJP, is not willing to buy this. Sources said Mr Mukherjee called senior BJP leader, Mr L K Advani, and the Leader of Opposition in the Lok Sabha, Ms Sushma Swaraj, on Monday and informed them of the Government's willingness to hold back the FDI decision. A similar message was conveyed to the CPI (M) leader Mr Sitaram Yechury.

However, both Mr Advani and Ms Swaraj wanted the Finance Minister to convene an all-party meeting and announce the decision. The meeting could be called on December 7, they suggested. Both the BJP leaders clarified that the party wanted Parliament to run.

Later, at a press conference in Indore, Ms Swaraj demanded that the BJP's adjournment motion over the issue be allowed for discussion in the Lok Sabha. “Let the UPA Government clarify its stand on FDI in retail, only then the Lok Sabha will run smoothly. There will be no compromise on it,” she added.

Meanwhile, BJP spokesman Mr Ravi Shankar Prasad said, “The party has made it clear that it is in favour of roll-back. First, let Mr Mukherjee spell out the Government's plan, only then our party will take a final view on the deadlock in Parliament.”

Mr Yechury said, “We continue to stick to our demand of unconditional reversal of the decision on FDI. Mr Mukherjee told us that the Government had decided to put the decision in suspension and wanted Parliament session to continue.”

What could be the options before the Cabinet:

a) Reduce the limit from 51 per cent to 26 per cent or 49 per cent

b) Increase outsourcing from SMEs

c) Allow sourcing of agriculture produce from small/marginal farmers

Shishir.s@thehindu.co.in

Published on December 5, 2011 08:31