Says stability in policy is a must to boost investor confidence

The Centre has said that the decision on Foreign Direct Investment (FDI) in retail is a one-way street and once a State has opted for such stores, it cannot go back on the decision.

Commerce and Industry Minister Anand Sharma made it clear that the Centre was not ready to allow any State Government to reverse a decision on FDI. “States have the option to join. But it is not a revolving door. Policy has to have stability for investor confidence,” Sharma told mediapersons here on Monday. The Minister’s comment assumes significance after the Aam Aadmi Party-led Delhi Government made an application for withdrawal of approval for FDI in multi-brand retail in the State. This also sends a message to the newly elected BJP-led Government in Rajasthan that it has a fight on its hands if it wants to go the AAP way on FDI in retail.

Warning to AAP

In what seemed like a warning to AAP, Sharma said that its Government was in office because of the outside support of the Congress, and the Congress has opposed any such move (of withdrawing support to FDI in multi-brand retail). The Minister said that during the finalisation of the policy it was decided that while the Centre would come out with the enabling provisions after consulting all stakeholders, States would have the option to choose whether to accept FDI. “Those States that had the wisdom exercised the option. Those States that want to do so in the future can do so. But it is not that today I give the option, tomorrow I want to withdraw. If the policy is not clear it will create confusion for domestic as well as foreign investors,” said the Minister. The policy allowing 51 per cent foreign investment in multi-brand retail was notified in September 2012. Delhi was among the 12 States that agreed to allow foreign multi-brand retailers to set up stores. The others include Himachal Pradesh, Maharashtra, Andhra Pradesh, Haryana, Rajasthan, Karnataka and Manipur.

Clear stance

Asked whether the Centre would seek the Law Ministry’s view on the issue, Sharma said that there was no problem in getting the law vetted, but he was very clear on the Centre’s stance on the issue. The Delhi Government had written to the Department of Industrial Policy and Promotion (DIPP) earlier this month seeking withdrawal of support for FDI in retail. The DIPP said it was studying the application. However, observers point out that the Centre may face problems if the Delhi Government refuses to give operating licences to foreign-funded retail stores. AAP’s stand against multi-brand retail was part of the 18-point agenda that it had submitted to the Congress before accepting support from the party. Interestingly, only one foreign retailer —Tesco — has so far applied to set up stores in the country (in partnership with the Tata Group). It is yet to firm up plans.

(This article was published on January 14, 2014)
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