Allow up to 49% FDI in multi-brand retail: govt official

Amid a debate within the government on allowing foreign direct investment in multi- brand retail, the nodal Consumer Affairs Ministry is insisting on a FDI cap of 49% in the sensitive sector, sources said.

"Starting with 49% FDI in the sector would be a safe thing," a senior Consumer Affairs Ministry official told PTI.

However, the Department of Industrial Policy and Promotion (DIPP), which is piloting the proposal for the politically sensitive sector, is in favour of a majority stake (51%) for foreign retail chains, with set-up conditionalities.

Prime Minister Manmohan Singh, in his interaction with editors yesterday, said there is a "big debate about it" in government and Parliament.

"There is fear of small traders, but without breaking such institutional barriers, there is fear of food inflation. I am hoping we can make a beginning in these areas. These are some of the ideas that are uppermost in my mind," Singh said.

The other big area of inter-ministerial differences relate to the minimum limit set for investment.

Of the $100 million (about Rs 450-460 crore) minimum investment proposed by the DIPP, at least 50% has to be earmarked for back-end infrastructure like cold storage, soil testing labs and seed farming.

However, the Consumer Affairs Ministry wants a larger share of 75% of multi-brand retail FDI to be invested in back-end supply chains.

"As India's back-end infrastructure is weak, the foreign investor should invest at least 75% of the $100 million in it," the official said.

While the DIPP has floated another discussion paper on the subject, a Committee of Secretaries is going through the issue and is expected to meet again soon.

The Industry Ministry has also proposed that multi-brand retail giants like Wal-Mart, Carrefour and Tesco may be allowed only in the 36 large cities which have population of over 1 million, according to the 2001 census.

Retail giants like US-based Wal-Mart and French Carrefour are very keen to enter the segment.

Bharti Enterprises and Wal-Mart Stores entered into a joint venture in August, 2007, and started cash-and-carry stores named 'BestPrice Modern Wholesale' in 2009.

At present, 51% FDI is permitted in single brand retail, while 100% is allowed in the wholesale cash-and-carry segment.