Bharti-Walmart seeks clarity on new wholesale trade FDI rules

Faced with the possibility of changing India plans due to a recent change in FDI norms, Bharti-Walmart today said it has sought clarifications from the government on caps imposed on sales by cash-and-carry players to their group's front-end companies.

"The new norms have only just been announced. There is still lack of clarity on them. We have asked the government to clarify certain points like what exactly is 25 per cent of total sales and what exactly are group companies," Bharti Walmart Managing Director and CEO Raj Jain, who is also Walmart India President said here.

Bharti Walmart is a 50:50 joint venture set up in 2007 between Bharti Enterprises and Walmart and is engaged in wholesale cash and carry trade. It supplies to Bharti Enterprises' front-end retailing arm, Bharti Retail that runs 'Easy Day' stores.

Earlier this month, the Department of Industrial Policy and Promotion (DIPP), while issuing a single document on FDI rules, had put a cap of 25 per cent on sales of cash-and-carry players to front-end retail companies owned by their Indian joint venture partners.

As per the DIPP rule, wholesale trade of goods would be permitted among companies of the same group. However, such wholesale trade to group companies taken together should not exceed 25 per cent of the total turnover of the wholesale venture and the wholesale made to the group companies should be for their internal use only.

When asked what could be the implications of the new rule on the India plans of Bharti-Walmart, Jain said it is premature to comment without clarity.

"Till the time some clarity does not emerge, it would not be appropriate for us to comment," he said.

According to consultancy firm KPMG, the new rules could force the wholesale companies to revisit India plans. It could make firms, such as Bharti Walmart, Tata Tesco and Metro AG to reduce their investment plans by around Rs 800 crore in the immediate term and the long-term impact will be much higher.