We have not gone back on our assurances on sourcing norms: Sharma
UPA II is not a Government in a hurry, but a Government which is committed to its reforms agenda, says Anand Sharma, Minister for Commerce and Industry. Sharma shares with Business Line the reason behind recent relaxation in the foreign direct investment (FDI) policy, and the politics behind the economics.
Excerpts from the interview:
Do you agree with the perception that this is a Government in a hurry to take decisions in the last year of its tenure?
It is not like that. We did bite the bullet in multi-brand retail for the first time in November 2011. Unfortunately, the timing was wrong because we were in the midst of a Parliament session and political opponents, BJP, in particular, had a partisan agenda. They didn’t allow Parliament to function. So we had to put the decision under suspension.
But, we continued to work on it. We had another round of consultation, made the proposal bit more forward looking, and took it again (to Parliament) on September 14 last year.
The latest changes are on the basis of regular interactions with stakeholders – both domestic and foreign retailers and investors. It was felt that there was some merit in the demands made and there was need for greater clarity and flexibility to give the investors some confidence. That’s exactly what we did on Thursday.
Will multi-brand retail attract investments now?
Of course! We have seen it in single brand, where we have brought about some changes, minor tweaks as I would call it. This brought about much needed clarity, leading to a flood of applications. To a large extent, we have been able to take care of the concerns of multi-brand retailers. However, we have retained the basic philosophy which influences this policy making.
But the Opposition remains unhappy and has alleged that the Government has gone back on its assurances?
I don’t think it is going back at all. We have retained 50 per cent investment in back-end infrastructure. But, well, there was much merit in the argument that since the threshold is Rs 100 million, the first tranche should have Rs 50 million for back-end. The rest would be a business decision as the businesses expand.
Similarly, in case of SMEs, the condition of 30 per cent sourcing remains. But, it will now be at the point of first engagement. The earlier decision was actually an oversight. Besides, when we are talking about sourcing from SMEs, the minimum investment threshold for medium enterprises is not actually Rs 1 million. So we were right in raising it to Rs 2 million.
Finally, it is an enabling policy. And it is the States’ call (on where stores should come up).
Are you apprehensive about trouble in Parliament when FEMA is amended for multi-brand retail?
We have taken the decisions. This means we have looked at all these aspects and then gone ahead. But, I can say there will be political opponents. I can understand ideological opposition, but there shouldn’t be daily skirmishes. Besides, the people of India have not given the BJP veto power to be exercised for 365 days in a year.
How soon will FEMA be amended?
Once the press notes come, the next steps will be taken. We will issue the press notes once minutes of the Cabinet come. Once press notes are issued, the RBI stands informed and so will all the banks. And then investments can come in. The rest is a process, which can be aligned in due course.
What about the States which are not on board yet?
Those States that have not opted for it (multi-brand retail), have done it only for partisan politics and not for economic reasons. When you look at States like in North – Rajasthan, Haryana, Uttarakhand, Himachal Pradesh, J&K and Delhi – have already joined (of the 12 States that have given consent), do you think Punjab would like to stay out? They have remained silent, but I don’t think they will refuse.
If you have look at States such as Maharashtra, Karnataka and Andhra Pradesh (who have given their consent), their population alone will be more than 230 million. These are the States and regions which are geographically contributing (as consumers for multi-brand retailers).
As far as sourcing is concerned, it can be done from anywhere. Agro industries can also be set up anywhere.
What will happen eventually is that even States, which have not become part of it, will not be able to prevent their traders and shopkeepers from buying from the nearest wholesale point.
What was the rationale behind changing the definition of control in the FDI policy?
The earlier definition was adopted in February 2009 and it was only for FDI purposes, as no other definition of control and ownership dealt with the FDI component. It was approved and notified.
Thereafter, in 2012, the Companies Bill was cleared and it is now before Parliament. There is a definition in the Companies Bill (on control) which is identical to SEBI’s definition. We have tried to align it (in the FDI policy) by deepening and broadening it.
Will the new definition of control have a bearing on the Jet-Etihad deal?
No. As per law, the existing definition of control would apply to the deal. The earlier definition was only ownership, which means a majority stake in equity and the power to appoint majority directors. But, if you look at the deal (Jet-Etihad), we have brought in the shareholders agreement, voting rights and elements like the power to appoint not only majority director but to take management and policy decisions as well. We have gone much beyond the existing definition of control while legally the existing one would have sufficed.
Critics have said that the Jet-Etihad deal was rushed through due to some commitments made to the UAE Government which was unhappy over the Etisalat issue?
It is not a question of commitments. We don’t make commitments with regard to business transactions. That goes through a proper scrutiny process. Please make a note of how many months it has taken to do the deal. We had high level task force meeting in February. It is August now.
The proposal is still to get the final scrubbing and to go to the CCEA. If a country takes five-six months to take a decision and it is seen as hurrying, then I don’t know at what pace they would want us to work. If they want to remain tortoises, with due respect to the dear tortoise, then they are welcome to remain there. I don’t have to walk at their pace. I have to take what we feel are the correct decisions.
Besides, the bilateral with UAE will be signed this month.