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Tough norms to be axed to woo elusive retail FDI

Jul 25 2013, 08:39 IST
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SummaryCabinet Note: Move also aims at parity among cities, to protect small industries

In a fresh bid to attract global multi-brand retail companies to the country, the government has decided to relax norms for FDI in the sector, including dropping the condition that such firms can open shop only in cities with a population of at least 10 lakh.

A Cabinet note moved by the department of industrial policy and promotion (DIPP) has also proposed to ease norms about sourcing from small-scale enterprises and the investment criteria for back-end infrastructure.

The government hopes the sops will finally spark investments as no company has even applied for permission since it allowed 51 per cent FDI in multi-brand retail last September.

The department has argued that since states or union territories which do not have a city with a population of 10 lakh are not subject to the restriction that foreign multi-brand retail firms can set up shop only in cities of that size, or larger, states which have cities with a population of 10 lakh or more should also get the same opportunity.

“Retail sales outlets may be set up only in cities with a population of more than 10 lakh as per the 2011 Census or any other cities as per the decision of the respective state government,” says the DIPP’s revised Cabinet note on FDI in multi-brand retail trading.

“In order to bring parity, it is proposed to extend such dispensation to all states, which have agreed to implementation of the FDI policy,” the DIPP has said.

So far, states such as Delhi, Andhra Pradesh, Assam, Haryana, Himachal Pradesh, Jammu and Kashmir, Karnataka, Maharashtra, Manipur, Rajasthan and Uttarakhand, along with UTs such as Daman, Diu and Dadra and Nagar Haveli have endorsed the policy in its current form.

FDI norms at present also mandate that at least 30 per cent of the value of the procurement of manufactured or processed products should be sourced from Indian ‘small industries’, which have a total investment in plant and machinery not exceeding $1 million. If at any point in time the valuation exceeds the limit, the unit will not qualify to be a “small industry”.

In the revised note, this clause has been amended to include “medium-scale industries with a total investment not exceeding $2 million would also be made eligible for sourcing of manufactured or processed products”.

“Further, the present condition of making those industries which outgrow this status ineligible for fulfillment of mandatory local sourcing, would result in loss

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