Multi-brand retail may see FDI soon

Font Size

Print

Feedback

Email

Discuss

Related Articles

14 FDI proposals worth Rs 826 crore cleared

The government is trying one more time to open foreign direct investment (FDI) in multi-brand retailing. However, if the proposals past muster with its allies, especially with the Left, such investments would come with strict riders on the role and functioning of the foreign partner in running the Indian venture.

This move would allow foreign retailers like Wal-Mart, Metro and Carrefour to enter the Indian market through joint ventures for multi-brand stores.

Currently, foreign retail companies are forced to enter into licensing agreements with Indian companies to set up shop here, as the present rules only permit up to 49% FDI in single-brand retail ventures.

According to senior government officials, once agreement on the fresh proposals, which are at a nascent stage, is reached among different wings of government, the equity that can be owned by the foreign partner would be decided. Sources, however, indicated that the government is likely to permit only a small shareholding by the foreign partner.

The officials said that the foreign partner would have a very limited role in the management of the venture, with curbs on the number of positions on the board. In addition, the chairman of the board would have to be an Indian. Foreign partners would not be allowed special powers by way of board resolutions or articles of association.

In addition, the venture would have to seek government permission before opening each additional store or changing the format of the venture. Besides, there will also be restrictions on the floor area of shops and the areas where they can be set up.

Sources said details regarding these are currently being worked out.

The government is also trying to dispel doubts in the minds of small retailers by pointing out that the entry of international food brands like McDonald’s, Pizza Hut and KFC has not crowded out local players like Bikanerwala, Haldiram or Dasaprakash.

The Indian retail market, which is the fifth largest globally, is estimated to grow from $330 billion in 2007 to $427 billion by 2010 and $637 billion by 2015.

Organised retail, which presently accounts for 4% of the total market, is likely to increase its share to 22% by 2010.