States opposed to multi-brand retail FDI in favour on paper

Five of 11 states listed as being in favour of foreign direct investment (FDI) in multi-brand retail are ruled by Bharatiya Janata Party or its allies, while another is ruled by the Aam Aadmi Party.

Both BJP and AAP are opposed to FDI in multi-brand retail as entry of international players could mean significant loss of business for neighbourhood stores.

The commerce and industry ministry released a consolidated FDI policy on Tuesday retaining 51 per cent FDI in multi-brand retail along with the condition that "state governments will be free to take their own decisions in regard to implementation of the policy".

The previous United Progressive Alliance (UPA) government had in 2012 allowed 51 per cent FDI in multi-brand retail with several conditions, including giving a free hand to states to decide whether foreign players should set up supermarkets.

Although the National Democratic Alliance (NDA) regime has opposed FDI in the sector, it has not changed the rulebook and there are no indications that it might do so.

Confederation of All India Traders Secretary General Praveen Khandelwal protested against the Centre's stand on FDI in multi-brand retail, announcing a mega meeting of trade leaders on June 8 in Nagpur to decide on a countrywide movement. ''Traders across the country are agitated,'' he said in a statement on Wednesday.

It is likely the government will consider allowing foreign investment in e-commerce, a growing category in retail. A Cabinet minister recently told Business Standard "Who can stop technology?" in reply to a question on whether FDI was likely in e-commerce.

Only Congress-ruled states had earlier said yes to foreign supermarkets. With the change in political regime in many states, their stand on FDI has not changed on paper. Haryana, Maharashtra, Rajasthan, Andhra Pradesh and Jammu & Kashmir are listed in the consolidated FDI policy as favouring FDI in multi-brand retail.

Haryana, Maharashtra and Rajasthan are now BJP-ruled states. Andhra Pradesh is ruled by the Telugu Desam with BJP backing, while in Jammu & Kashmir Peoples Democratic Party is in alliance with BJP. Delhi, which has come under AAP rule, is also being shown as favouring FDI in the sector.

A senior official in the Maharashtra government confirmed there was no reversal in the state's FDI policy for multi-brand retail. He added the decision taken by the previous Congress government prevailed. There has hardly been any discussion on the subject since the Devendra Fadnavis government took charge last October.

An AAP spokesperson said, "We have not given consent to FDI in multi-brand retail.'' He did not elaborate whether the Delhi government had officially informed the Centre on its stand. Deputy chief minister of Delhi Manish Sisodia told reporters, "We will not allow entry of FDI in retail sector in the national capital.''

Rajasthan Chief Minister Vasundhara Raje had conveyed the state's revised stand early in 2014 to the then commerce minister Anand Sharma.

Officials noted the decision to allow FDI in a sector could not be revoked under normal circumstances. According to the policy, "such agreement, in future, to permit establishment of retail outlets under this policy, would be conveyed to the government of India through the Department of Industrial Policy & Promotion and additions would be made to the list accordingly". The rules do not talk about deletion of states from the list.

The UK's Tesco is the only foreign retailer to have proposed investment in India in multi-brand retail. It tied up with the Tata group's Trent for a joint venture to operate stores in Karnataka and Maharashtra, both Congress-ruled states then. The NDA government clarified permission given to Tesco to operate stores would not be withdrawn.

Besides Delhi, Rajasthan, Maharashtra, Andhra Pradesh and J&K, other states favouring FDI are Himachal Pradesh, Karnataka, Uttarakhand, Manipur and Assam, all ruled by the Congress or its allies. The two Union Territories named are Daman & Diu and Dadra & Nagar Haveli.

THOSE IN FAVOUR

BJP states saying YES to FDI in multi-brand retail

• Haryana
• Rajasthan
• Maharashtra

BJP alliance states saying Yes

• Andhra Pradesh
• Jammu & Kashmir

AAP state saying yes

• Delhi

Congress states saying yes

• Himachal Pradesh
• Karnataka
• Uttarakhand
• Manipur
• Assam

Union Territories* saying yes

• Daman & Diu
• Nagar Haveli

* Both Daman & Diu and Nagar Haveli FDI rules will be governed by the Centre

(With inputs from Anil Sharma in Jaipur)