There has been no breakthrough in the impasse over FDI in retail yet. With the government standing firm on retail reforms and the opposition refusing to yield even an inch, the Parliament was adjourned for the eight day.
As the political logjam over the recent decision to allow FDI in retail continues, DIPP Former Secretary RP Singh said that the retail majors will have to reinvent their model in India in the long run.
When asked about capping the number of stores just like the cities that can be rolled out, Singh indicated that it will not be proper. "The whole purpose of the policy will be defeated if we put a cap on the number of stores," he added. Here is the edited transcript of his interview to CNBC-TV18. Also watch the accompanying video. Q: There still seems to be no clarity on what the government will finally do. The Prime Minister made it clear that a rollback will not be possible. What could be the additional sweeteners? The mandatory requirement of sourcing will be hiked from perhaps 30% to 45%. What could be some of the other sweeteners if the government wants to make this decision more palatable to both the opposition as well as the allies? Before the committee of secretaries finally gave its final recommendations, there was a proposal to insist on a 50% mandatory rural employment. Could something like that be brought back to make this more palatable?
A: The discussion paper that was put in place in July 2010, there are two extra conditions which have not formed a part of the cabinet decision. One is the 50% rural employment in the frontend by these retail majors.
Second was that we should try to integrate the kirana merchants into this value chain by insisting on a certain percentage of the turnover to come out of the cash and carry business.
In the long run, the retail majors will have to reinvent their model in India. The real estate costs in India in major cities will be so high that it will not be possible for them to open their own stores.
In the long run, a mix of their own company owned stores and franchise stores will be the right model. Even for the small retail to reinvent, if the logistic part is taken care of by these major retail chains, this will be very good for the country in the long run. In this process, the wastages will be removed and efficiency will be brought into the system. Q: These two important clauses, which were part of the discussion paper, but eventually not part of the final recommendations of the committee of secretaries
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