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Retail FDI guidelines likely only after winter session concludes

Nayanima Basu & Indivjal Dhasmana  |  New Delhi 

Minutes of Cabinet meeting yet to be issued; no urgency, say officials.

Even a week after the Cabinet approved a proposal to open multi-brand retail for foreign direct investment (FDI), the minutes of the meeting have not reached the department of industrial policy and promotion (DIPP).

Officials said experts had started preparing implementation guidelines on retail FDI, but these could not be issued unless minutes of the Cabinet meeting came to DIPP. “Broadly, we know the decision, so we are preparing the guidelines. But we have not yet received the Cabinet minutes,” officials said.

They also said the implementation guidelines may not see the light of day till the ongoing session of Parliament ended, as political opposition to the government move intensifies. The session is on till December 23.

Industry Secretary P K Chaudhery told journalist the implementation guidelines would be issued in due course. “The rules to be framed will answer the issues raised and decisions taken in the Cabinet,” he said. “The work (is) in progress.”

Asked if the government would again invite public comment before formulating and announcing the rules governing FDI policy, Chaudhery said there was no such move.

The ministry had earlier reversed its original stance that sourcing of 30 per cent requirements from small and medium enterprises (for any retail investment as a result of the new rules) only from India would violate the country’s commitment to the World Trade Organisation (WTO).

Last week, it had said that the 30 per cent sourcing was to be done from micro and small enterprises anywhere in the world. When asked why the requirement was not made India- specific, commerce and industry minister Anand Sharma had said that would have violated commitments to the WTO.

On Thursday, Chaudhery said India had not given any commitment to WTO on the retail sector. “The fact of the matter is India has taken no commitment in FDI. Second, it is a subject matter of GATS (General Agreement on Trade in Services) and not GATT (General Agreement on Tariffs and Trade), and in GATS, we have taken no commitment on retail,” he said.

The industry secretary said if it was a question of investment in manufacturing, then GATT gets attracted. GATT governs merchandise trade, while GATS norms are for services trade.

The sourcing requirement will come into effect in case of FDI in multi-brand retail and if FDI in single brand retail increases beyond 51 per cent, Chaudhery clarified.

Some states, including West Bengal, complained they were not consulted before the Cabinet decision. On this, the DIPP secretary said the states were consulted when Parliament’s standing committee on commerce & industry discussed the issue. After this, the department had put up a draft set of rules on its website for getting feedback from all stakeholders. His department, he said, had not written directly to state governments while the policy was being formulated.

He defended the Cabinet decision, saying the move would help farmers get adequate returns for produce, small scale manufacturers to become big and to improve supply bottlenecks. Also, that the Cabinet decision was just an enabling framework. Operationalisation rested with state governments.

If states amended the Agricultural Produce Marketing (Regulation) Act, the Cabinet decision would immensely benefit farmers, but even without the changes, their lot would improve if FDI was allowed in multi-brand retail, he said.

First Published: Fri, December 02 2011. 00:44 IST