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Finance moots 49% multi-brand retail FDI by automatic route

Jul 31 2013, 14:45 IST
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SummaryLast September, govt permitted foreign supermarkets in India by allowing up to 51%FDI

The finance ministry has proposed that up to 49 per cent foreign direct investment (FDI) in multi-brand retail be allowed by the automatic route.

Last September, the government permitted foreign supermarkets in India by allowing up to 51 per cent FDI, subject to government approval. The cabinet is set to review FDI norms in multi-brand retail on Thursday.

On July 24, commenting on the cabinet note moved by the Department of Industrial Policy & Promotion (DIPP), the finance ministry proposed that “FDI up to 49 per cent is allowed on automatic route”.

The DIPP has declined to tweak the cabinet proposal saying this was not on the agenda of the July 16 meeting chaired by the Prime Minister, at which fresh FDI limits were decided. It was also not part of the suggestions put forward by the Arvind Mayaram committee.

Sources, however, said the panel headed by Economic Affairs Secretary Mayaram had recommended that the FDI limit be raised to 49 per cent in almost all sectors through the automatic route, with 74 per cent FDI in multi-brand retail trading by the government approval route.

“The finance min’stry’s proposal could get support from the Planning Commission,” an official said. The planning commission is yet to submit its response to the DIPP proposal. The departments of commerce, consumer affairs and agriculture & cooperation too haven’t given their responses. They have been asked to put forward their views at the cabinet meeting.

In its July 24 reply, the Department of Economic Affairs also suggested that instead of restricting $ 50 million in fresh investment in back-end infrastructure, the foreign entrant may be allowed to acquire them through “outright purchase, lease or contract from an existing company”.

The DIPP, however, maintains that this would “negate” the conditionality framed to address the acute need for augmenting back-end infrastructure to reduce post-harvest losses.

No global retailer has yet moved an application with the Foreign Investment Promotion Board which vets FDI proposals.

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