Multi-retail FDI making headway, but with riders

Secys’ panel meets this week, amid differences; BJP seniors may be invited.

The committee of secretaries (CoS) looking into the issue of allowing foreign direct investment (FDI) in the multi-brand retail segment is likely to meet this Friday to try for more agreement on the issue.

The government seems to be contemplating 51 per cent FDI in the segment but is planning to introduce several riders with it. The panel, headed by cabinet secretary Ajit Kumar Seth, would also look at finalising these. At present, India allows 100 per cent FDI in cash and carry wholesale trade, that is business-to-business, and 51 per cent in single-brand retail. However, FDI in multibrand retailing is not allowed.

Inter-ministerial discussions are also underway. Though the government has already held a series of meetings within various quarters of the ministries, the one underway now is more broad-based, having larger participation and examining all the riders and their effects, a senior official from the department of industrial policy and promotion (Dipp) told Business Standard.

“Besides finalising the riders, the CoS would be looking at bringing everyone on one common platform. Nothing would be approved unless a solid consensus is achieved,” said the official.

Some senior leaders from the opposition Bharatiya Janata Party (BJP) may be invited in the meeting. There has been severe resistance from BJP-ruled states and small and medium traders to opening the sector. BJP president Nitin Gadkari had earlier said such a move would adversely impact the interests of these small and unorganised retailers. He has also urged for more discussion on the issue.

Once the inter-ministerial consultations are over and the CoS gives a green signal, the draft policy would go to the Cabinet Committee on Economic Affairs.

The draft policy has suggested some key stipulations for foreign investors wishing to enter the sector. Some of the significant ones are a mandatory minimum investment of $100 million and, of this, half to go for supporting back-end infrastructure such as warehouses, cold-storages and transportation.

For the past year, the government has been pushing hard to open the sector in the backdrop of rising food price inflation. Dipp had floated a discussion paper on this in July last year, to generate a debate.

It appears an inter-ministerial group under chief economic adviser Kaushik Basu has already moved a draft proposal on this to the higher echelons of the government, arguing for the importance of allowing FDI in organised retail to check the price rise.

Within the government, the Planning Commission and ministry of agriculture are ready for 51 per cent FDI. The department of consumer affairs has supported the case for a 49 per cent cap. The micro, small and medium enterprises ministry has said the government should limit FDI in multi-brand retail to 18 per cent. The department of economic affairs has not stated its position.