This Article is From Jun 27, 2013

Walmart, Tesco, others seek changes in multi-brand FDI norms

Walmart, Tesco, others seek changes in multi-brand FDI norms
New Delhi:

Asking the government to tweak foreign direct investment (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 (small and medium enterprises)," 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 SMEs.
     
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, Mr Mittal said: "We have said that at the entry point it should be an SME but if it crosses the limit of $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 per cent 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 Department of Industrial Policy and Promotion (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, Mr 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.

Tata Services resident director Bharat Wakhlu, who was also present in the meeting said the minister had assured the industry on a response to the points raised by it.
     
Sounding critical on various issues on land acquisition, policies of various state government, he, however, said: "No amount of policy can assure investment. Until and unless investors feel that their investment is secure, it would not come. It applies not only on FDI policy but also on all policies."
     
Hoping for a speedy response from the government, Reliance Retail president Biju Kurien said: "If clarifications are received quickly then there will certainly be greater interest amongst international retailers to invest in this country."
     
Retailers Association of India chief executive officer, Kumar Rajagopalan said: "One of worry was if one state allows it (multi-brand retail) today and tomorrow reverses it (what happens) but he (Anand Sharma) clarified that states cannot reverse it after allowing it."
     
TESCO India director corporate affairs Sameer Barde welcomed the "supportive" nature of Mr Sharma to the issues raised by the industry.
     
Others who attended the meeting included Jene Noel, Carrefour India managing director Jean Noel, Landmark managing director Vinai Singh, Aditya Birla Retail chief financial officer Atul Daga along with
representatives of industry chambers.

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