Probe Walmart-Bharti tie-up: PMO to DIPP

The Prime Minister’s Office (PMO) has forwarded a letter by a member of Parliament belonging to the Communist Party of India (CPI) to the Department of Industrial Policy and Promotion (DIPP) for a probe. In the letter, CPI member M P Achuthan alleged that there were irregularities in the financial dealings between US retail giant Walmart and Bharti Retail Ltd.

When contacted, a senior DIPP official said it was not for his department to probe the deal. The Reserve Bank of India (RBI) and the Enforcement Directorate should investigate, he added.

In the letter, Achuthan said that Walmart already invested $100 million (Rs 455.80 crore) in Cedar Support Services on 29 March, 2010. Bharti Retail Ltd is a 100 per cent subsidiary of Cedar, the letter said.

The letter alleged that Cedar collected Rs 899 crore as capital, of which Rs 456 crore was foreign capital by Walmart through compulsory convertible debentures, which are counted as foreign direct investment (FDI). According to the letter, Bharti Ventures, a Bharti group company, invested as much as Rs 443.35 crore.

Only last month did the Cabinet allow FDI up to 51 per cent in multi-brand retail, subject to states’ approval.

The letter alleged that all the capital was invested in Bharti Retail, a multi-brand company, where FDI was prohibited till the Cabinet decision. Achuthan alleged that the object clause of Cedar was changed to include provision of services in various sectors such as real estate consultancy and design, to get past the FIPB.

When contacted, a Bharti spokesperson said, “We are in complete compliance of all regulations. All details have been shared with the relevant authorities.”

A Walmart spokesperson gave a similar response. “We are in complete compliance with India’s FDI laws. All procedures and processes have been duly followed and details filed with relevant Indian government authorities, including the RBI.”

Achuthan had earlier raised the issue in Parliament on September 5, 2012. He said that Commerce and Industry Minister Anand Sharma had confirmed that the RBI had not been informed before the FDI deal was signed between Walmart and Cedar.

The CPI MP wanted the letter to be rather referred to the finance ministry and not commerce ministry, under which the DIPP falls.

“I have now written to the Prime Minister. I understand he has referred my letter to the finance ministry for an investigation. If he hasn’t, and has returned it to Sharma, whose reply suggests something is wrong, well, we all know what that means. It is then just delaying tactics on the part of the government.”