Foreign brands may face curbs on wholesale trade

Written by Bipin Chandran | New Delhi, Dec 30 | Updated: Dec 31 2007, 05:46am hrs
The government wants to tighten the rules governing cash-and-carry wholesale trading to prevent foreign companies from retailing goods in India.

As part of this move, foreign companies involved in the cash-and-carry business will not be allowed to deliver goods to customer locations or set up wholesale units on customer premises. Instead, the firms will have to set up wholesale warehouses from where customers will have to buy goods, government sources said.

Currently, foreign companies are sending goods to customers at their premises. They are also setting up units at customer locations for storing goods. The government is of the view that this does not adhere to Indias foreign direct investment policies. But there are no plans to reduce the FDI permitted in the sector, which is 100% through the automatic route.

The government also wants to bring goods sold over the Internet by foreign companies under the purview of retail trade guidelines. This moves comes as the government fears international retail companies can violate norms to gain a backdoor entry into the domestic market.

For example, a global retail company can set up warehouses across India and sell goods over the Internet. This will be a complete violation of the retail trade norms.

In addition, the government wants foreign companies wanting to introduce its brands to India, directly or the through franchisees, to first invest in the country. This will come as a major jolt to a large number of foreign retail brands that have been planning to licence out popular brands to Indian companies.

According to the present retail norms, only single-brand retailers are allowed in India, that also with just 51% foreign investment. In the case of e-commerce, 100% foreign investment is permitted in business-to-business e-commerce, but no foreign equity is allowed in business-to-customer e-commerce ventures.