FDI in food retail: Firms need to maintain separate books, inventories

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New Delhi | Published: June 26, 2018 5:58:54 AM

The government on Monday said food retailers having foreign investments will have to keep accounts and invoices separate from those of their other businesses.

The move will enable companies like Amazon that have already invested heavily in setting up warehouses.

The government on Monday said food retailers having foreign investments will have to keep accounts and invoices separate from those of their other businesses.

However, such retailers can use the warehousing facility meant for other businesses to store food products as long as such edible items are “kept physically separated and readily distinguishable from inventory for any other business of the investee company”, the Department of Industrial Policy and Promotion (DIPP) has clarified.

The move will enable companies like Amazon that have already invested heavily in setting up warehouses, logistics and transportation facilities for their online marketplace models in India to utilise some of these resources for their food retail venture, while maintaining an arm’s length.

In July 2017, the government had cleared a proposal by Amazon to invest around $515 million in retailing food products manufactured in India. Later, Big Basket and Grofers also got approval to invest $155 million and $25 million, respectively, in food retailing.

In 2016, the government allowed 100% FDI in trading – including through e-commerce – of food products produced or manufactured in India, subject to the government’s approval.

The DIPP has now clarified: “Business of food product retail trading is required to be kept distinct and separate from other businesses, if any, of the investee company by way of maintenance of separate books of accounts and records (including sales records), separate bank accounts, and separate invoicing.”

“Similarly, whether in the front-end or in the warehouse, inventory of the business of food product should be kept physically separated and readily distinguishable from inventory for any other business of the investee company. However, this requirement does not preclude usage of the same storage/warehousing facility and associated infrastructure/manpower for different businesses of the investee entity,” it added.

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