The long pending issue of opening of multi-brand retail to foreign investment moved one more step, with the top secretaries forwarding 10 recommendations to the commerce and industry ministry on Friday.
“We have formally received the minutes of the Committee of Secretaries (CoS) meeting held on July 22 and appropriate decision will be taken soon,” an official on the condition of anonymity said. The ministry is examining it and would take the proposal before the Cabinet soon, the official added.
On August 3, commerce and industry minister Anand Sharma had said in Rajya Sabha that an early decision on opening the sector for FDI would be taken after he formally gets the recommendations.
The CoS headed by cabinet secretary Ajit Kumar Seth has recommended that 51% FDI could be allowed in the sector, which is dominated by mom and pop stores. The CoS has also suggested that at least 50% of the investment and jobs should go to rural areas.
Besides, the entities with FDI should source at least 30% of their requirements from the MSME sector. A foreign player would have also to commit at least $100 million investment.
The other recommendations include, allowing such mega stores to sell nonbranded items and such entities should be allowed only in towns with population of over 10 lakh. India allows 51% FDI in single brand retail and 100% in cash and carry format of the business.
In July 2010, the Department of Industrial Policy and Promotion (DIPP) floated a discussion paper on opening of the politically sensitive multi-brand retail.
Once the Cabinet clears the proposal to allow FDI in the politically sensitive sector, foreign players like WalMart, Carrefour and Tesco, can form joint ventures with Indian companies to open multibrand retail outlets.
While the Central government formulates norms for FDI, the joint venture firms would have to seek permission from state governments (as per the Shops and Establishment Act) to open stores.
“In general any company or establishment needs to take permission from the state authorities to start business and so the joint ventures would require such permission before they can start their stores,” the official added.
While several retail and farmers associations have opposed the idea of allowing FDI in the sector, the government claims the move would not only help in creating jobs, but arrest the spiralling inflation.
