CoS on multi-brand FDI to approach Cabinet soon

The Committee of Secretaries (CoS) on foreign direct investment (FDI) in multi-brand retail trading (MBRT) is expected to approach the Cabinet Committee on Economic Affairs (CCEA) by next week. The CoS is finalising the minutes of the last meeting held on July 22.

The minutes of the meeting will also be forwarded to all key ministries and departments involved with the matter. The document will form the basis of the final draft policy before it is placed before the Prime Minister’s Office for final approval. The CCEA will consider the matter once “the political will is built”, said a senior official in the Department of Industrial Policy and Promotion (Dipp).

The Dipp official said the CoS was unlikely to meet again and the concerns of all ministries and their suggestions would be addressed in the minutes. It would also give final shape to some of the riders or conditions that needs to be adhered to by companies keen to invest in the sector.

Last week, while the CoS, under the chairmanship of Cabinet Secretary Ajit Kumar Seth, did give an in-principle nod to the proposal of allowing 51 per cent FDI into multi-brand retail based on a majority consensus, a few ministries, including Consumers Affairs and Micro, Small and Medium Enterprises (MSME) had opposed the move and instead suggested a 49 per cent limit.

Apparently, Ministries of Statistics and Programme Implementation, Consumer Affairs and MSME have urged “gradual opening of the sector in a phased manner,” the official said.

However, there was complete consensus on the conditions that would be made mandatory for investors. Investment proposals below the minimum threshold amount of $100 million would be considered. It would also be mandatory for investors to spend 50 per cent of the amount towards building and maintaining back-end infrastructure such as warehouses, cold-storage and transportation to set up world-class facilities.

Retailers will also not be allowed to set up shops in cities that have a population of less than one million.

According to the ICRIER study on the ‘Impact of Organised Retail on Unorganised Sector’ in 2008, where organised retail chains have a presence had an adverse impact on the sales and profits of unorganised retailers.