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No taboo on FDI in brownfield back-end infra in multi-brand retail: Anand Sharma

Interview with Commerce minister

Nayanima Basu  |  New Delhi 

Clearing the air on the government's position on some conditions in allowing foreign direct investment (FDI) in multi-brand and single-brand retail, Anand Sharma, minister of commerce, industry and textiles, tells Nayanima Basu there is no restriction on global retailers acquiring existing back-end infrastructure. He adds sourcing norms for single-brand or multi-brand retailers would not be uniform. Edited excerpts:

What is the government's position on FDI in multi-brand retail, in terms of investment in back-end infrastructure?

We have no issues with an investor coming and looking at what exists. But when it comes to 50 per cent in back-end infrastructure, that is an additionality, and that is in the first tranche that comes in. After that, if they bring more investments, every time they cannot create the same infrastructure. This is because then, infrastructure would be need-based. There is no taboo on picking up brownfield (new), but the objective of the policy is investment in creating greenfield back-end infrastructure. And, this would not include land, but only that component that they have to construct.

Would there be any uniformity on the sourcing conditions in multi-brand and single-brand retail FDI, something a few leading global retailers had been seeking?
For multi-brand, it is different because many of them are in fresh foods. So, when it comes to sourcing, only the 'processed or manufactured' component is there, which is a small content of the overall trade. So, it is not 30 per cent of all; it is 30 per cent of what is made in SMEs or food and agro-processing industries. But when it comes to their buying, they can make their own business arrangements directly with farmers or cooperatives-about that, we are not concerned. For single-brand, they do not have the food component. So, for them, it is different, and would be so.

But there was some ambiguity on the IKEA issue.
IKEA is past. Their issues have been answered, and there is absolute clarity on that. IKEA has a global model; single-brand means it has to be a global model. They would have to replicate the same model everywhere; they cannot have country-specific models. And, their cafes are not retailing in food. So, it is different from food retailing. They are not food retailers, but a furniture giant.

What is the government doing to raise the FDI limit in defence, be it to 49 per cent or 74 per cent? Why is there a dichotomy between the ministries of commerce & industry and defence?
Recently, I had taken up the matter with the defence minister. I had written to him for a meeting and discussion. We can make presentations to them on what we have in mind. The Indian private sector and major global defence players have expressed interest to enter into technological collaborations and partnerships. Many of these technologies have multiple applications. We are looking at spin-offs for other sectors, too. It would also reduce our dependence on imports. We have allowed Indian private sectors to enter into partnerships with major global defence equipment manufactures, be it the Tatas, Mahindras or L&T. Raising the cap would benefit defence public sector undertakings, too.

There is no question of dichotomy here. Defence is a sensitive sector. We have allowed 26 per cent FDI and now, we are looking at increasing it to 49 per cent, which would be a meaningful move. I am convinced this is the way forward.

What stance would you take in case the European Union (EU) finally refuses to grant 'data-secure' status to India at the coming ministers' meet in June, as it is a legislative decision?
I would like to wait for the outcome of the chief negotiators' meeting (on May 15). They have a very clear mandate. What we have on the table is fairly substantial. We are very clear India has a serious interest in the services trade; India should be accepted as a 'data-secure' country. I am clear they have to give the status to India.

Next week, new Chinese Premier Li Keqiang would visit India for the first time. Would the government raise the trade imbalance issue with the new leadership?
I do not think that is on the agenda. India and China are engaged in a strategic and economic partnership. China is our major trading partner, but investments are low. However, we hope there will be more technical collaborations, particularly in India's manufacturing sector. There is a big imbalance in bilateral trade, and there are issue of market access, particularly in the pharmaceuticals and information technology sectors.

You said India wanted more Chinese investments here. Yet, these are subjected to major scrutiny in a few sectors. Do you plan to address this issue?
I do not think there is any China-specific scrutiny in India. There is no bar when it comes to manufacturing, infrastructure and engineering. In sectors in which there is scrutiny, it will be so, irrespective of the country it is coming from. These are security requirements, owing to the sensitivity of the sectors. So, there is no harm. It is not a barrier.

First Published: Wed, May 15 2013. 00:49 IST