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Retailers have warned that foreign investment will not flow into India in the multi-brand segment till the Government clarifies on key issues related to mandatory back-end investment and local sourcing.
Commerce and Industry Minister Anand Sharma, who met representatives of major retail companies including Walmart, Reliance, Tesco and Carrefour on Thursday, assured them that an “early and appropriate” view will be taken on all areas of concern.
Business Line had reported on June 27 that Department of Industrial Policy and Promotion is already working on a Cabinet note, which would bring clarity on pending matters related to investment in the back-end and mandatory sourcing from small and medium enterprises.
“The policy, in its current form, has not attracted any application let alone investments. The Government has to tweak rules to attract investment,” said Bijou Kurien, Chairman, Retail Committee, FICCI. Kurien is also head of Reliance Retail.
Rajan Bharti Mittal, promoter of Bharti Group, which has a joint venture with US-based retailer Walmart in the cash-and-carry retail segment, said that retailers had voiced their concern on lack of clarity over whether the Government intended to make it mandatory for foreign investors to invest 50 per cent of every $100 million investment in multi-brand retail ventures in back-end infrastructure.
Sourcing
“We are saying that while 50 per cent of the first tranche of investments can be mandatorily invested in the back-end, the same should not hold for subsequent investments. On the issue of sourcing from SMEs, we have said that it should be ‘preferable’ and not ‘mandatory’. The industry cannot buy everything from SMEs,” Mittal added.
While the DIPP is willing to go along with the industry’s demand that mandatory 50 per cent investment into back-end infrastructure be limited to initial investment, the Government may not tweak with the existing requirement that 30 per cent of sourcing done by foreign retailers should be from the small and medium enterprises (SMEs), a DIPP official said.
Thierry Martin, Director of International Development and Partnership, French retailer Auchan, said that the group sought clarification on whether investments in States opposing FDI in retail would pose problems in future.
Stable policy
Assuring investors that the FDI policy was stable, the Commerce Minister said that it was a national policy adopted after wide discussions and approved by Parliament. It was also endorsed by the Supreme Court. “There is inbuilt stability in it. One should ignore political posturing,” Sharma said.
Industry body CII, too, said that there was a need to ensure consistency between the Union and State Governments to facilitate investment.
Tesco Director for Corporate Affairs Sameer Barde said that the Government had shown positive response to tweaking investment norms.
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