The government is unlikely to allow farm items that are not edible to be sold along with food products under the proposed 100% foreign direct investment (FDI) regime in marketing of food products, a senior official said.
In a note circulated for inter-ministerial consultation to finalise detailed guidelines, the department of industrial policy and promotion (DIPP) also steered clear of the idea of allowing sales of kitchenware or related items in retail outlets alongside food products, as favoured by the ministry of food processing, to make it attractive for shoppers who would want as many items as possible under one roof.
“The proposal is about food products, only food products,” the official said. “The idea is not to complicate matters so that retailers have enough clarity before they invest,” he added.
There were speculations that some farm items might be clubbed with food products for this purpose.
While sourcing norms will focus on local supplies to safeguard the interest of domestic farmers as was proposed in the Budget, the government may also allow the imports of certain flavours and preservatives which are not locally produced or in which there is a local shortage, to help the processed food sector, said another government official.
There is also a proposal to allow players to retail their products online, although a final call will be taken by the Cabinet, he added.
Under the extant norms governing multi-brand retailing, FDI is allowed up to 51% and at least 30% of the inputs have to be sourced locally from small and medium enterprises.
In the Budget 2016-17, the government permitted 100% FDI in the marketing of food products through the FIPB (Foreign Investment Promotion Board) route. “This will benefit farmers, give impetus to food processing industry and create vast employment opportunities,” finance minister Arun Jaitley had said in his Budget speech.
However, critics have pointed out that opening up only the marketing of food products fully is unlikely to attract foreign retail giants like Walmart and Tesco, as no supermarket can attract massive footfall and be profitable with just food items on its shelves.
The food processing ministry, which has been pitching for allowing 100% FDI in the sector, wants at least 25% of such investments made in creating back-end infrastructure in rural areas to benefit farmers.
FE had earlier reported that investments in back-end infrastructure will mean “capital expenditure on all activities, excluding spending on front-end units”, which will include distribution, logistics, storage, warehousing, agriculture market produce infrastructure, quality control, design improvement and packaging.