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Ignoring the concerns of the Ministry of Agriculture, the Government proposes not to put any obligation on the foreign investor in the multi-brand retail for sourcing agriculture produce locally.
The Cabinet is expected to consider allowing foreign direct investment (FDI) in multi-brand retail on Thursday.
The plan is to allow 51 per cent FDI in multi-brand retail along with increasing the FDI limit from 51 to 100 per cent in the single brand retail.
The final draft is also believed to redefine small and medium enterprises (SME) in order to allay any possible allegation of violation of international commitments. The draft was finalised late last week and early this week after the Department of Industrial Policy and Promotion (DIPP) obtained views from the Finance Ministry and others.
According to sources, there was an earlier proposal to source 60 per cent agriculture produce from low income and resource poor farmers. Such a farmer was defined as one whose land holding is less than 10 hectares. A senior Government official said, “It is felt that it would, in any case, make eminent commercial sense for the retailers to source fresh produce locally, it is unlikely that retailers would undertake large-scale imports of agricultural products.”
In such a situation any rider might be difficult to implement and monitor. Hence it was not feasible to introduce any condition regarding sourcing agriculture produce, the official added.
In terms of sourcing from SMEs, the final draft is believed to have kept the minimum limit as 30 per cent but some changes are likely to be made in the explanation.
Earlier it was said that the definition of SME would include even global firms. Now, the official said, this global firms are likely to be excluded.
The new proposal is expected to say that minimum of 30 per cent of the procurement of manufactured/processed products should be sourced from small industries. Here small industries mean those which have a total investment of $0.25 million at the time of installation.
If this valuation is exceeded at any point in time then the firm will be excluded from the definition of small industry, the official clarified.
In terms of increasing FDI limit for single brand retail, it is likely to clarify again that single brand product retailing would cover only products which are branded during manufacturing. At the same time the Government is also expected to stipulate that foreign investor should be the owner of the brand.
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