Concept papers on retail, defence FDI likely next week

The government is likely seek public comments for liberalising FDI in the lucrative retail and defence sectors next week.

The Department of Industrial Policy and Promotion (DIPP) has announced to float six concept or discussion papers on foreign direct investment (FDI) related norms in different sectors, including defence, multi-brand retail, agriculture and financial sector, among others.

"You can expect the papers on defence and retail next week," the sources said. The concept notes would be floated on the DIPP Website to elicit views from stakeholders.

The paper on retail FDI may include a provision that interested global retailers would have to put in a significant part of their investment in the back-end infrastructure like warehousing and clod storage, a source said.

At present, FDI is not allowed in multi-brand retail, which is dominated by the neighbourhood kirana stores and is a politically-sensitive topic. However, foreign players are permitted in wholesale trade as also in single-brand retail.

Since FDI is not permitted in retail, world's number one retailer Wal-Mart has settled for a cash-n-carry (wholesale) joint venture with the Bharti Group.

On defence, commerce and industry minister Anand Sharma stated recently that the government was open to liberalise FDI norms in defence and inter-ministerial consultations were on.

While, the DIPP is understood to be favouring an increase in FDI in defence space, the opposition seems to be coming from the defence establishment itself.

Minister of state for defence MM Pallam Raju had told the Rajya Sabha on April 28 that the government was not planning to allow 100 per cent FDI in defence production.

Major industrial houses like Larsen & Toubro, the Tatas, the Mahindras and Punj Lloyd are already engaged in different defence-related businesses.

Of the total defence allocations of Rs 1,47,344 crore for 2010-11, a large chunk of Rs 60,000 crore was earmarked for capital expenditure.