Retail, aviation FDI dream still on: Anand Sharma

The government is trying to push through FDI reforms in the retail and aviation space. In an interview with CNBC-TV18, Commerce Minister, Anand Sharma, said the issue of FDI in civil aviation is under consideration. He discussed it with civil aviation minister Ajit Singh and added that he is reaching out to the chief ministers of Punjab and Orissa. Sharma is also in talks with Mamata Banerjee on multi-brand retail FDI.

Sharma emphasised on the fact that they have a coalition government and all the allies need to be consulted before arriving at a conclusion. Below is the edited transcript of the interview on CNBC-TV18. Also watch the accompanying videos. Q: Are you considering the issue of FDI in civil aviation seriously?
A: This is under consideration. There has been a note which has been received from the civil aviation ministry. Yesterday after the cabinet meeting, I had a brief interaction with the civil aviation minister. The Prime Minister, finance minister, civil aviation minister and I discussed the issue.
I can only say that a decision on this matter will be taken soon. When you are in a coalition government, it's not a question of an executive decision, you need to talk to all the partners. I think that process is underway. Q: You're hopeful that we will see a decision on FDI in civil aviation over the next few weeks?
A: In case of civil aviation, it is a decision being taken. In case of multi brand it's a question of a decision to be notified and the decision has been taken by the cabinet. It has only been paused because of what happened in Parliament last November and December. After that we have started another round of consultations with the ministry of food and consumer affairs. They are talking to the farmer organizations. Q: Those have gone well, we have been tracking those consultations, the stakeholder consultations have gone well. What about the political consultation? I understand you were supposed to talk to the chief ministers of northern states sometime this week, is it likely to be on schedule?
A: I have spoken to the government in Punjab. The deputy chief minister had a talk with me. Their Food Minister Adesh Pratap Kairon was here. I referred it to the chief minister too. I have written to the chief minister of Bengal. I had another meeting with Mamata Banerjee. She has her reservations which I respect, but at the same time there are states who want it. I did go to Bhubaneswar to talk to Naveen Patnaik. It is their call and we will respect what the states want. Q: If I were to read between the lines of what you are saying, eventually the license has to be put out by a state government. The final authority therefore, rests with the state. Are you just going to communicate this message more clearly? Is the articulation going to be clearer? The states are the final authority and we are finally going to see you notify them?
A: The FIPB approvals can only be there if the state has endorsed a proposal. According to the Trade Licence Act, the license has to be given by the state government. Under the Shop and Establishment Act, the state government accepts to do it. It’s unfortunate that this entire issue has been trapped in partisan politics.
Here I would like to say one thing. Yesterday I was hearing many comments including one from the opposition party BJP. It was not a well informed response or reaction to the economic crisis that the country and the world is facing. I only have one thing to say. It’s high time. Enough of partisan politics.
We should rise above that and come together on issues that serve India's supreme national interest. If every progressive measure can restore investor confidence, lift the sentiment, it can result in job and wealth creation. But, it is blocked because of partisanship. It will be doing a disservice to India. Q: Before I move any further on these two particular issues, because sentiment needs to be turned around, can we expect any forward movement on FDI in multi-brand retail, FDI in civil aviation before the monsoon session of parliament?
A: I am not in a position to say whether it will be before or after because we are engaged. Q: Do you expect a breakthrough?
A: I am an eternal optimist. Q: I don't want to go down the road of optimism, but I want to talk to you about single brand retail. It has seen no takers and that is because of the 30% domestic sourcing.
A: No, that's not true. Q: It is true sir. IKEA, who was willing to put in USD 2 billion in this country said I can’t deal with your 30% domestic sourcing norms. Individual companies have written back to us saying that we are uncomfortable with the domestic sourcing norms. I am sure they have expressed that apprehension to you as well?
A: They did. IKEA chairman had flown to Paris to meet me and our officials when I was there for a visit. Subsequently, their team had met with our officials and I think they are reasonably satisfied with the responses that they have received to their queries. I didn’t see much of a problem. Q: Are you going to tweak the sourcing norms?
A: It's not a question of tweaking. First of all, some SMEs and Indian business entities will eventually come in. It is for the first year and then it also has to be in value terms. Already if you look at IKEA, 30% of their sourcing is from India. Question is what qualifies to be an SME. Q: As far as the Indian economy is concerned on every single parameter, the rupee, IIP, inflation and now GDP, the scorecard is looking appalling, it's looking abysmal. This is not the time for stents like interventions to remove the block. This is time for bypass surgery. Is the government ready with a plan of action?
A: Host of factors is responsible for the situation it has not happened overnight. There has been de-acceleration for the last 10 months and this is the fourth quarter reports which have trickled in. Global scenario is very depressing. Growth in developed country like Americas is not more than 1.2%. Eurozone has moved to the negative growth territory.
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These factors impact both trade and capital flows. As far as the emerging economies are concerned, there have been repeated downward revisions both for China and India. These events are happening over the months. Q: Let's stop blaming the external environment. Many organisations say that our problems are self inflicted. Are we suffering from self-inflicted goals?
A: Global factors definitely affect trade account deficits, current account deficits, petroleum prices and rupee volatility. These factors are beyond India's control. Reserve Bank has limited maneuverability when it comes to intervening to stabilise the rupee and I hope that they do that, because it's getting critical.
The capital inflows have been particularly from the foreign qualified investors, institutional investors, the norms have been eased. We hope the money will come.
We were comfortable with the FDI inflow last year which was all-time high of USD 50 billion. We will do well. We are going to take decisions and we have taken decisions which will help. Q: Are those apprehensions which have been expressed being addressed?
A: They will be addressed. Q: Are we going to see any notification in terms of new rules for FDI in single-brand retail?
A: The rules should satisfy. We have taken onboard some of the concerns. It required some clarity and the clarity will be made available. IKEA is going to come in and one of the British companies Sabero has already come in. Q: So IKEA is going to come in. What have they committed in terms of investment?
A: I don't know. I don’t look at the proposals. Q: You said you are optimistic that you will be able to do if not USD 50 billion that was done in terms of FDI last year, somewhere close to that. Has that retrospective amendment which has now become law through the Finance Bill turned your plan awry?
A: I think that is much misunderstood. It is a clarificatory amendment to the Act. Q: But you are the commerce minister. You are going to have to bring capital into this country. You are going to be talking to foreign investors. Foreign investors at this point in time are sceptical not just about India, they are saying you don’t even want us here…
A: No. First of all, it is not investment-related. It is a revenue related-issue for an offshore transaction. It is not FDI which is coming into India. So let’s be very clear on that now. Q: I am not quibbling about that. I am asking you as you speak with foreign investors, are we not expressing their apprehension on what has happened with the retrospective amendment?
A: Investors are very intelligent people. Here it's a clarificatory amendment which the situation demanded. But the finance minister has gone on record that all the tax matters settled up to April 1, 2012 stand closed will never be reopened.
Has he not gone on record? What more reassurance is required? But in case of other countries, including from where the company Vodafone originates, they have had retrospective amendment to the financiers. So you cannot single out India on revenue-related issues. Q: As I said I don't want to quibble on that, but since you talked about Netherlands and I want to talk to you about the government's approach to the fact that you have got arbitration notices from Vodafone and Telenor. The finance ministry is going to have to finalise the government's response, but surely you are an important stakeholder in the negotiations on your own?
 A: No, when it comes to some of these cases my ministry also is directly involved. We are examining all those issues. I know that we need to reassure our investors that India is committed to sustaining a policy regime which is encouraging of investments, which is friendly and protective of investments.
At the same time, we don't want to disturb the investor-friendly environment. This is a court adjudication particularly in the 2G issue. Those investors who had come and invested into India, came because of our policy. They had the necessary approvals.
This is a justifiable issue and the review and the curative petitions have been filed. So it would not be appropriate for me, when the courts are ceased off the matter. I hope cogently these facts are brought before the courts so that wherever rectification or curative action is required, it is done. Q: The message that foreign investors and even domestic investors seemed to have got at the end of this 12 month painful period that we have gone through is that they are not welcome in India, that their capital is not welcome in India.
A: That's not true. Q: It is true. That is the response that we are getting from the people. So is there now a need for the government to step up its public relations exercise?
 A: Well, that's what I am doing. Q: So there is now going to be a campaign to try and talk to foreign investors and turn their opinion about India?
A: Exactly. We will engage. We will reassure them that these apprehensions are not correct. If there are any concerns, bonafide or otherwise, this government is committed to address them. We will assure that India has and shall have in future an environment and a policy regime which is stable and encourages investment. Q: You have just met with the board of trade and Indian industry is feeling frustrated and is saying that there is not enough executive decisions that are taking place and approvals are not fast enough. We are -0.3% down in manufacturing sector, the worst that we have seen in the last 9 years, this is a catastrophe as far as the manufacturing sector is concerned?
A: Manufacturing is linked to domestic and external demand. If there is a contraction of demand it impacts the sector because the industry cannot sit on large inventories if they are unable to sell in the domestic market or international markets.
This is one factor which the industry has bought to our notice.
 
Q: Industry says that consumption story has not been extinguished, but there are problems as far as interest rates are concerned, problems with approvals, problems of getting things off the ground in terms of policy confusion?
A: No, there is no policy confusion. Q: Comments were made on SEZ at Board of Trade?
A: No, but people are also very enthused about the National Manufacturing Policy. People are very happy that the seven NIMs have been notified, national investment and manufacturing zones. We are moving to the implementation phase that would be transformative. We are talking of establishing standalone industrial townships, which will lift manufacturing activities in the country and bring in technology. Q: But that’s what SEZs were meant to do?
A: No, don’t mix. A manufacturing policy is the biggest policy. Q: Special Economic Zones were meant to be the engines of growth as well?
A: Yes. You cannot create a industrial township in SEZ. Q: You can’t change the SEZ Act, but some rules being relaxed?
A: It’s only about tax regime stability. IT is an issue but what should be the size and all, those issues are being addressed. Q: By when do we expect to see a clarification as far as SEZs are concerned on the apprehensions expressed and the possible relaxations and rules?
A: Very soon. Q: Why are we seeing so much back and forth on crucial decisions? On FDI in pharma we have the GoM on pharma, Arun Maira Committee that met and presented its recommendations which said that CCI should look at brownfield investments into this sector. For a 6-month window it was meant to be the FIPB. We understand the Prime Minister's Office wants it to be done by the CCI and not the FIPB, you want it to be done by the FIPB not the CCI, the CCI says I am not equipped to do it, I will need to amend the CCI Act? This is the problem that investors want answers to?
A: That is a problem. The issue is true and the Prime Minister chaired a meeting. Health minister Ghulam Nabi Azad, finance minister Pranab Mukherjee, myself, we expressed our own understanding and view. Now, the issue was on the investments in the pharma sector. We are all for and I am the votary of 100% FDI under automatic route for the greenfield investments. Q: But not Brownfield?
A: Brownfield that’s a question of acquisitions. Lot of domestic R&D has gone in; FIPB route has to be scrutinized on a case-to-case basis.
_PAGEBREAK_ Q: Does the government have a plan of action?
A: The finance ministry has come out with a number of notifications to ease investment flow. The government is addressing issues related to investments and trade. You will see that some other decisions will be taken in the next few days. It's a crisis where India is not insulated. Q: Are you are going to have to take tough decisions as far as diesel, LPG and kerosene is concerned?
A: We have a hydra-headed Opposition that was out on the street yesterday. The loss caused by the bandh was Rs 60,000 crore. Is there any accountability? Q: But shouldn't there be accountability for the government? Can we have the government speak in different voices?
A: The government has no choice. Q: On diesel, LPG and kerosene…
A: I don't think Jaipal ever commented on diesel or LPG. Q: He absolutely did...
A: He said "We are not changing". So, he didn't say we are touching them. Q: He said we are not going to hike prices.
A: Exactly. Q: Then how do you hope to reduce fiscal deficit?
A: I don't know. This would have been discussed between the FM and the petroleum minister. The larger picture is that we also are a welfare state and we have make sure sections of the society get relief.
The trade account deficit is made of petroleum, gas and gold imports. But we have to ensure that there is a sustained thrust on exports. Export targets have been met in a very difficult environment. Q: What do you hope to achieve in terms of the export target? Can we expect any export sops?
A: Let's see, its not a question of sops, but what kind of support we can give. Q: What kind of support can you give?
A: We have taken on board all the suggestions and in the next three days we will reflect and on June 5 we will unveil the annual supplement. Q: Do you believe you will have the room to provide a significant kicker for export growth?
A: If you look at the policy it has been stable and incremental since August 2009. I am pretty sure that after having formed our estimates, we will be able to sustain the momentum. Q: How severe is the corporate lobbying?
A: I am not affected by any corporate lobbying. We work in close partnership with the industry. Our decisions will be fair and judicious and will not be influenced by lobbying. Q: Most growth estimates for FY13 are at an abysmal 6-6.5%.
A: Our concerns are real and we shall definitely intervene and act to our best ability.