Consumer Affairs Min bats for 49% FDI in multi-brand retail

New Delhi:  Even as a debate is on within the government on allowing foreign direct investment in multi-brand retail, the nodal Consumer Affairs Ministry is insisting on a FDI cap of 49 percent in the sensitive sector, sources said. “Starting with 49 percent FDI in the sector would be a safe thing,” a senior Consumer Affairs Ministry official told. However, the Department of Industrial Policy and Promotion (DIPP), which [caption id=“attachment_34431” align=“alignleft” width=“380” caption=“The Consumer Affairs Ministry wants 75 percent of multi-brand retail FDI to be invested in back-end supply chains.. Reuters”]  [/caption] is piloting the proposal for the politically sensitive sector, is in favour of a majority stake (51 percent) for foreign retail chains, with set-up conditionalities. Prime Minister Manmohan Singh, in his interaction with editors yesterday, said there is a “big debate about it” in government and Parliament. “There is fear of small traders, but without breaking such institutional barriers, there is fear of food inflation. I am hoping we can make a beginning in these areas. These are some of the ideas that are uppermost in my mind,” Singh said. The other big area of inter-ministerial differences relate to the minimum limit set for investment. Of the $100 million (about Rs 450-460 crore) minimum investment proposed by the DIPP, at least 50 pe cent has to be earmarked for back-end infrastructure like cold storage, soil testing labs and seed farming. However, the Consumer Affairs Ministry wants a larger share of 75 percent of multi-brand retail FDI to be invested in back-end supply chains. “As India’s back-end infrastructure is weak, the foreign investor should invest at least 75 percent of the $100 million in it,” the official said. While the DIPP has floated another discussion paper on the subject, a Committee of Secretaries is going through the issue and is expected to meet again soon. The Industry Ministry has also proposed that multi-brand retail giants like Wal-Mart, Carrefour and Tesco may be allowed only in the 36 large cities which have population of over 1 million, according to the 2001 census. Retail giants like US-based Wal-Mart and French Carrefour are very keen to enter the segment. Bharti Enterprises and Wal-Mart Stores entered into a joint venture in August, 2007, and started cash-and-carry stores named ‘Best Price Modern Wholesale’ in 2009. At present, 51 percent FDI is permitted in single brand retail, while 100 percent is allowed in the wholesale cash-and-carry segment. PTI