Retailers seek changes in multi-brand FDI norms

Asking government to tweak FDI norms in multi-brand segment, retailers today said sourcing rules must be made similar to that of single brand while demanding foreign firms be allowed to put only 50 per cent of first tranche of investment in back-end infrastructure.

Representatives of both foreign and domestic retail companies, including Walmart, Tesco, Carrefour, Bharti , Aditya Birla Group, Tatas, Reliance and Pantaloon, among others met Commerce and Industry Minister Anand Sharma here.

The government on its part said "an early and appropriate view will be taken so that the guidelines can accordingly be
given out".

"The industry raised two-three major points like the 30 per cent sourcing issue. We have said that it should be 'preferable' and not 'mandatory'. Industry cannot buy everything from SMEs," Bharti Enterprises Vice-Chairman and Managing Director Rajan Bharti Mittal told reporters after emerging from the meeting.

As per current FDI policy in the retail sector, 30 per cent of products sold by single brand retailers, where 100 per FDI is allowed, are to be "preferably" sourced from small and medium enterprises (SMEs).

Also read: India to lift FDI cap in few sectors by July third week: FM

On the other hand, in multi-brand segment, where only 51 per cent FDI is allowed, it is "mandatory" for the company to procure 30 per cent from SMEs.

Commenting on the definition of SMEs, Mittal said: "We have said that at the entry point it should be an SME but if it crosses the limit of USD 1 million (of investments), we should be allowed to continue sourcing from the same unit."

On the contentious issue of investment in the back-end infrastructure, he said: "We should be allowed only 50 percent of the first tranche of investment on back-end infrastructure and future investment should not be restricted."

As per existing rules, foreign retailers in multi-brand segment will have to make a minimum investment of 100 million in India, of which 50 per cent must be in the back end chain.

A recent clarification by the DIPP has stated that the investment in the back-end infrastructure will have to be specifically for the new chain of stores that the foreign retailer would set up in India.

When asked about the demands of the retailers, Sharma said: "It was important for the government to hear where are the areas or the issues which may require some more clarity...we have sufficient space to address those concerns, bring in the clarity and an early and appropriate view will be taken  so that the guidelines can accordingly be given out." Official sources, however, said even if the demands of the retailers were met, the matter will have to be taken to the Cabinet for approval.