The government, which has come under intense fire for being moribund owing to an all-pervasive policy freeze, is likely to announce an FDI package
within the next fortnight, which could include allowing foreign investment in multi-brand retail
and the civil aviation sector.
But in a major scaledown, the government will only allow 49 per cent FDI in multi-brand retail against the earlier proposed 51 per cent, which may act as a deterrent. Global supermarkets have been waiting to access the large Indian consumer sector. If all goes well, then Indians can get ready to welcome Walmart and Co.
According to reliable sources, all issues related to FDI
were discussed at a meeting held by commerce and industry minister Anand Sharma with industry taskforce members, including CII president Adi Godrej, Sunil Kant Munjal of Hero Motocorp and telecom czar Sunil Bharti Mittal, who also has a strong presence in the organised retail sector through his joint venture with the world's biggest multi-brand retailer - Walmart.
The government was forced to put the cabinet decision last November allowing global behemoths to own 51 per cent in Indian supermarkets on hold following strong protests from its ally, the Mamata Banerjee-led Trinamool Congress. The DMK joined the BJP-led opposition chorus to stall the move.
The government has veered round to the decision that states keen on going ahead with the decision should be allowed to do so. Several Congress-ruled states including Delhi, Maharashtra, Rajasthan and Uttarakhand have already written to the Union government expressing their willingness to implement the decision.
Other agricultural states such as Punjab are also in favour of the move as organised supermarkets have the potential to bring huge economic benefits to farmers. But because of political reasons, the Badal government, which is an ally of the BJP, has not come forward to give its consent.
The Centre's decision would pave the way for global retail chains such as Walmart, Carrefour and Tesco to bring in much needed foreign investment in modern infrastructure such as cold chains and packaging. The BJP, on the other hand, has been opposed to the move on the ground that big retail chains would drive the neighbourhood mom-and-pop or 'kirana' stores out of business.
The commerce minister has been maintaining that the decision on allowing FDI in multibrand retail was suspended and not rolled back. But as with everything that India does in terms of policy rollouts - it has already strewn imponderables in the path of the biggies by creating a ring-fencing framework which makes you think twice on entering India. According to the cabinet decision, the minimum sum to be brought in as FDI by a foreign investor would be $100 million (Rs 550 crore).
At least 50 per cent of the total FDI brought in shall be invested in 'backend infrastructure', such as processing, manufacturing, distribution, design, quality control, packaging, logistics, storage, warehouse, infrastructure etc. Expenditure on land cost and rentals, if any, will not be counted for the purposes of backend infrastructure.
Additionally, at least 30 per cent of the procurements of manufactured/processed products shall be sourced from Indian micro and small industries that have a total investment in plant and machinery not exceeding $1 million.
Retail sales stores may be set up only in cities with populations of more than 10 lakh - as per the 2011 Census, only 53 cities qualify for FDI in multi-brand retail out of nearly 8,000 towns and cities. The issue of allowing foreign airlines to buy up to 49 per cent stake in cash-starved Indian carriers is also on the cards.
The finance and the civil aviation ministries have approved a proposal to amend the FDI guidelines for the aviation sector moved by the commerce ministry.
At present, India allows foreign investors, not related in any way to the airline business, to buy up to 49 per cent stake in domestic airlines but foreign carriers are not permitted to invest in them. Allowing foreign airlines to buy stake in domestic carriers is expected to benefit Kingfisher Airlines, which is burdened by a debt of over Rs 7,000 crore. While Kingfisher has been pitching for permission to allow foreign airlines to invest in domestic carriers, Jet Airways and IndiGo are opposed to it.
Courtesy: Mail Today