Rajya Sabha to discuss FEMA amendment in multi-brand retail today

Experts say policy not likely to be grounded on technical issue

The policy on foreign direct investment (FDI) in multi-brand retail trade, which was cleared by the Cabinet last September, is set to undergo an acid test in Rajya Sabha today, with discussions on proposed amendments to the Foreign Exchange Management Act (FEMA) regulations.

Not even a single application has come from any retail chain since the sector was opened up to 51% FDI last year.

Amendments to FEMA regulations are necessary for multi-brand retailers to set up shop here. So, if the government fails during the voting process, the policy could get stalled once again.

The UPA-2 regime is banking heavily on the passage of these amendments to be able to attract FDI.

A government official argued there was no chance of the retail FDI policy getting grounded on a technical issue like amendment of FEMA regulation, since it was an amendment of a regulation, and not law. “It does not materially alter FEMA,” the official told Business Standard.

But trouble is already brewing over the amendment with widespread political opposition. Senior CPI(M) leader Sitaram Yechury had earlier said, “If all those who joined us on the streets to protest the allowing of FDI in multi-brand retail trade vote with us in the Upper House, then the government is in a minority.”

Yechury also said the government has not consulted the Left parties on the matter even though it had discussions with the main opposition BJP.

Constitutional expert Subhash Kashyap said last year after the multi-brand policy that amendment to any rule and regulation under an Act must be placed in Parliament for a period of 30 days, and that this clause was not specific to FEMA or retail FDI.

Explaining the procedure, Kashyap had said rules and regulations were made by the government under any Act. It is an executive function. While an amendment of a law had to go to Parliament for discussion and voting, that of a rule or a regulation needed to be tabled in both the Houses for 30 days, he said.

The amendment of the rule or regulation is automatically referred to the Committee on Subordinate Legislation. If the committee feels the government has over-stepped its function or if there is a violation of law, it raises objections and sends the report to the House. If the objection is technical and minor, the government usually sets it right.

Fundamentally, the policy remains the same, according to Kashyap. Although the amendment of a regulation — in this case relating to FEMA and retail FDI — does not call for a debate in Rajya Sabha, a member can give notice for a debate. If the notice is admitted by the speaker of the House under Rule 193, there’s a discussion but no voting. And, if the notice is accepted under Rule 184, there will be voting.

According to him, only in an extremely rare case could there be a notice of motion for a regulation amendment. “Normally, no policy gets stuck over technical issues,” he said.

"It is a procedural issue and not a policy issue. I do not see any reason for it to get blocked, as it is an enabling condition only. Opposition has more important things to raise concern over at this point, not FDI in multi-brand retail," said Arvind Singhal, founder and chairman, Technopak, a leading consultancy.

Earlier this month, the government amended the FDI policy on multi-brand retail trading by relaxing some of the tough riders in order to attract more investors.