Minority foreign stake in multi-brand retail on agenda; all-party meet before Parliament reconvenes tomorrow.
It may not be the end of the road for FDI in multi-brand retail just yet. The UPA government is exploring the possibility of tinkering with the policy fine print to buy peace with its allies and the Opposition.
As a compromise formula, the government is weighing the option of phased introduction of FDI in retail. The buzz is it could consider bringing down the FDI level in multi-brand retail to 26 or 49 per cent from 51 per cent allowed by the cabinet 10 days ago. Since there’s hardly any noise around raising the FDI limit to 100 per cent for single-brand retail from 51 per cent, the government may not tweak that part of the policy.
The deliberation around bringing down the FDI limit to 26 or 49 per cent is one of the ways to ensure that effective control remains in Indian hands. The BJP had earlier said FDI should be allowed in phases, not in one go.
A senior executive at a retail firm told Business Standard foreign majors wanted a foothold in the Indian market, and they would “readily take the revised FDI option”. The FDI level could be increased subsequently, he said.
However, another retail sector representative argued that with further dilution of the FDI level and clauses, it would be a non-starter for foreign giants who have been waiting for years to enter India. “It would be a face-saving measure for the government, but in the real sense it has nothing to offer as a compromise any longer,” he said.
Bowing to political pressure, the government has called an all-party meeting at 9 am on Wednesday before Parliament meets after a four-day break. After the all-party meet, the government is expected to make an announcement in the House that it is keeping in abeyance the decision to allow 51 per cent FDI in multi-brand retail until a consensus is reached with all the parties concerned.
Finance minister Pranab Mukherjee on Monday informed leader of the Opposition Sushma Swaraj and Left leader Sitaram Yechury of the plan to keep on hold the big-bang reform in the retail sector. The cabinet will meet the same evening to discuss the direction and contours of the policy.
While a Congress Parliamentary Party (CPP) meeting on the issue had been called for Thursday, the agenda has been changed now. The CPP will deliberate only on the country's economic situation now, according to a party functionary.
The finance minister’s announcement is likely to ensure Parliament begins normal functioning Wednesday onwards.
The BJP will hold internal meetings to discuss how it should react to the government move. Its stated stand was it would not let the House function unless the government announced a total rollback. However, indications are the formulation might be acceptable to it, partly because the party is under compulsion to claim some sort of victory.
Government managers say the proposal “is not dead in the water” and tweaking of the policy will be part of the consensus-building exercise. Apart from bringing down the FDI level, other changes being talked about include brand dilution. That is, even if Walmart or Carrefour set up front-end retail operations along with local partners, they may not be able to display their names outside the stores.
In a recent interview to Business Standard, Bharti Walmart chairman Rajan Mittal had said Walmart stores had different brands across countries. He had indicated India may follow that pattern of not using the Walmart brand on the stores.
Another option is the stores could be asked to ensure a part of their sales were picked up by small kirana stores. And, the size of small and medium enterprises (from which the stores have to buy at least 30 per cent of their products, according to the current policy) could be brought down to $250,000 from $1 million currently.
CII president B Muthuraman said he hoped to see an early consensus among the political leadership. “It is in national interest and, therefore, we are hopeful all significant political stakeholders would converge on the subject soon.”
