States up the ante against FDI in retail

Our Bureau Chennai | Updated on November 28, 2011


Political momentum is building up against the United Progressive Alliance Government's policy to allow 51 per cent foreign direct investment (FDI) in the retail sector.

After the Uttar Pradesh Chief Minister, Ms Mayawati's tirade against the move on Saturday, it was the Tamil Nadu Chief Minister, Ms Jayalalithaa's turn to oppose FDI in retail.

Meanwhile, the Centre launched an advertisement blitzkrieg to justify its decision, placing full-page advertisements in major dailies across the country on Sunday.

For those opposed to the policy, a boost came in the form of Ms Jayalalithaa issuing a statement saying her Government will not allow multi-brand global players, permitted under the new policy, to set up hyper-markets in Tamil Nadu.

“While Parliament is in session, this move of the Government, without even consulting the State governments, is unprecedented and indicates the overweening arrogance of the UPA government,” she said, in a statement.

States' permission crucial

Ms Mayawati, too, said she would not allow the multi-brand players to operate in Uttar Pradesh. The Trinamool Congress, a key partner of the UPA, has opposed the decision. The principal opposition party, the Bharatiya Janata Party (BJP), has said that the States ruled by it will not permit multi-brand global players to set up shop.

State Governments have a key role to play in allowing FDI in retail. Under the Shops and Establishments Act, these players will have to get the State governments' permission to launch their operations.

According to a Press Trust of India report, going by the 2010-11 Census, global players such as Walmart, Tesco and Carrefour will face hurdles in 28 of the 53 cities that have been thrown open to them as the Opposition is in power in those places.

Political realignments

The Union Commerce and Industries Minister, Mr Anand Sharma, said on Saturday that five States have agreed to allow FDI. These are Haryana, Maharashtra, Rajasthan, Orissa and Punjab.

More trouble could brew for the Manmohan Singh Government this week, with the Janata Dal (United) tabling an adjournment motion against the policy. The issue, that had stalled proceedings on Friday, could figure again in Parliament on Monday.

The controversial move is seeing some interesting political re-alignments. While the Akali Dal, a long-time National Democratic Alliance member, is supporting the policy, key UPA members such as the DMK are opposed to the move, as is the Trinamool Congress. Parties seen as part of the Third Front, including the Left and the Telugu Desam, are also opposed to the policy.

Strike call

An all-India strike has been called for on December 1 by some trade organisations; the NDA and the Third Front have extended support to it. Most of the major business chambers have welcomed the decision but organisations representing small and medium industries are apprehensive of the move.

A PTI report quoting Mr V.K. Aggarwal, President, Federation of Indian Small and Medium Enterprises, said though the FDI policy has a rider stipulating that 30 per cent of the value of a multi-brand entity's requirements should be sourced from medium and small industries, such procurement need not be specifically from India.

The Centre on November 24 cleared the policy to allow FDI in the retail sector, wherein multi-nationals will be allowed to own as much as 51 per cent of a retail venture selling more than one brand. The Government also approved plans allowing companies that sell a single brand to own 100 per cent of their operations, removing the previous limit of 51 per cent.

It has also stipulated that multi-brand players should make a minimum investment of $100 million, with 50 per cent of this going towards building up back-end infrastructure. The policy guidelines are likely to be issued this week.

Published on November 27, 2011

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