New Governments in Delhi, Rajasthan want to withdraw approval

The Centre is likely to seek the view of the Attorney-General on whether States can legally withdraw approvals for foreign direct investment (FDI) in multi-brand retail.

“The idea is to legally explain to the two States that have sought withdrawal of permission for retail FDI why it can’t be done. We plan to attach a copy of the Attorney General’s reply on the matter with our own response to the States’ demand,” a Commerce and Industry Ministry official told Business Line.

The newly-elected Governments of the Aam Aadmi Party in Delhi and the Bharatiya Janta Party in Rajasthan have written to the Department of Industrial Policy & Promotion (DIPP) seeking withdrawal of permission for FDI in retail given by the former Congress-led Governments in both States.

Commerce and Industry Minister Anand Sharma had earlier said FDI in retail was a one-way street and once a State had opted for such stores, it could not go back on it.

“The DIPP has no doubts that once permission is granted by States, it can’t be withdrawn. However, we want to get it legally vetted so that nobody questions it later,” the official said.

Interestingly, even if the Centre disallows States to withdraw their blanket approval for FDI in multi-brand retail, they could always refuse to give licences for setting up foreign-funded retail outlets. “The Centre is not worried about that because giving State licences for opening shops does not fall in our domain,” the official said.

The Centre opened up the multi-brand retail sector to foreign investments in September 2012 by allowing 51 per cent FDI.

Delhi and Rajasthan were among the 12 States that agreed to allow foreign multi-brand retailers to set up stores. Others include Himachal Pradesh, Maharashtra, Andhra Pradesh, Haryana, Karnataka and Manipur

The Centre does not want States to back-track on their approvals because the lesser the number of States permitting FDI in the sector, the less attractive it is for foreign retailers to invest in the country.

Although the country has received just one FDI application in the sector – from UK-based Tesco which plans to open super markets in India in a tie-up with the Tata Group – more applications are expected to flow in after this year’s general election.

(This article was published on February 4, 2014)
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