The government has restricted free flow of foreign direct investment (FDI) into duty-free shops in India. Foreign investors will now have to seek mandatory approval of foreign investment promotion board (FIPB) before making investment in duty-free set-ups. Apart from FIPB approval, for duty-free shops in certain border areas, approval from central board of excise and customs (CBEC) needs to be sought too.
The FIPB has noted that though it is in the nature of retail trade, considering the area of operation in the duty-free area of SEZ, airports and seaports, the activity of setting up duty-free shops may be allowed on case-to-case basis rather than giving them a blanket approval.
With annual revenues from airport retailing in India ? which includes duty-free sales ? set to cross $1 billion this year, international companies engaged in duty-free retailing are queuing up before the government agencies seeking permission to operate in the country. Companies already present include Switzerland-based Dufry, Dubai-based Flemingo, Turkish firm Setur Sevis Turistik, Dublin-based Aer Rianta International and Spanish firm Aldeasa, among others.
Experts say there are three reasons for overseas airport retailers flocking to India ? the healthy 20%-plus growth rate; increase in retail space at international airports; and increasing footfall and per passenger spend on airports.
Industry sources say Delhi International Airport (DIAL) is expected to clock $100 million revenue from airport retail in the current financial year, while other airports, like Mumbai and Bangalore, will do a business of $60-80 million each. More duty-free shops are expected to come up at Delhi, Mumbai, Bangalore, Kochi and Hyderabad international airports.
DFASS, one of the largest duty-free operators in the US with a turnover of $150 million, wants permission to set shop in India, while its rival In Flight Services Worldwide wants permission to supply duty-free products on board Indian carriers operating in the international circuit. Both these operators have now approached the FIPB as investments in airport retail is not under the automatic route. DFASS currently operates on Air Canada, Delta, Gulf Air, Silk Air, Singapore Airlines and Avianca, among others.
