PM calls all-party meet to break logjam, Sharma retracts on sourcing clause.
Even before the ink could dry on its big-ticket reform step after a long stretch of the so-called ‘policy paralysis’, the UPA government clearly stands cornered.
With even some key allies and outside supporters joining the Opposition parties in their chorus against the government on its latest decision to clear 51 per cent foreign direct investment (FDI) in multi-brand retail, Prime Minister Manmohan Singh has taken it upon himself to convince the critics that all is well with the policy, and that the reform is not going to be short-lived.
| UP IN ARMS AGAINST FDI How the numbers stand in the Lok Sabha | |||
| 205 MPs* | Opposition parties | ||
| 36 MPs | UPA allies (TMC, DMK) | ||
| 43 MPs | Outside supporters (SP, BSP) | ||
| *Excluding four Shiromani Akali Dal MPs who are in favour of FDI in retail Note: The govt needs the support of at least 272 MPs if a voting takes place | |||
| RETAIL STOCKS TUMBLE | |||
| BSE prices in Rs | |||
| 25-Nov | 28-Nov | % chg | |
| Vishal Retail | 22.60 | 20.35 | -9.96 |
| MW Unitexx | 16.70 | 15.10 | -9.58 |
| Shoppers Stop | 395.65 | 367.35 | -7.15 |
| Brandhouse Retails | 14.65 | 13.90 | -5.12 |
| REI Six Ten Retail | 18.55 | 17.70 | -4.58 |
| Pantaloon Retail | 234.05 | 223.35 | -4.57 |
| Provogue | 27.20 | 26.00 | -4.41 |
| Store One Retail | 17.05 | 16.37 | -3.99 |
| Trent | 1058.45 | 1024.65 | -3.19 |
| Compiled by BS Research Bureau | |||
The PM has called an all-party meeting, which is rather rare, to break the Parliament logjam over retail FDI, while commerce and industry minister Anand Sharma has already initiated a rollback of sorts.
Sharma on Monday clarified to reporters that retail FDI would be allowed only if the foreign players sourced 30 per cent of their products from India’s micro, small and medium enterprises (MSMEs). However, this is in contrast with a Cabinet background paper Sharma had given out to the media just three days ago, on Friday. The paper specified that the 30 per cent sourcing needed to be done from MSMEs anywhere in the world and that it was not India-specific. “No, that was misconstrued (in the Cabinet),” Sharma told reporters here, adding that 30 per cent sourcing had been made mandatory from Indian MSMEs. He said the provision of procuring from Indian small units would not violate the WTO obligations.
Confronted with severe opposition to retail FDI, Sharma was seen in a damage-control mode. Apart from shifting his stand on sourcing, the minister also wrote to several key MPs, explaining the advantages of the policy, which had been kept on the back burner for years. Over the weekend, the commerce and industry ministry brought out full-page ads in national dailies, stressing the benefits of FDI in the retail sector.
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Even as the negative political sentiment brought down retail stocks on Monday, sources in the government remained optimistic that UPA was not looking at rollback of retail FDI policy, at least not yet. The notification on the Cabinet decision clearing 51 per cent FDI in multi-brand retail and raising the foreign investment cap for single-brand retail to 100 per cent is yet to be issued. A minister, on the condition of anonymity, told Business Standard the only tweaking that the government would do to the retail FDI policy would be in the 30 per cent sourcing clause.
That is, the notification would say that foreign retailers would have to source 30 per cent from Indian MSMEs, and not from anywhere in the world.
The Union Cabinet had on Friday taken the politically sensitive decision to allow the entry of foreign retailers into the space that had so far been dominated by Indian mom-and-pop stores, or kirana outlets. The decision, in spite of a divide within the Congress itself, came ahead of Assembly elections in five states, including Uttar Pradesh which has already witnessed mass-scale agitation against organised retail in the past. These states go to polls in 2012.
A bureaucrat, requesting not to be identified, argued that foreign retailers would like to wait for the elections to get over before taking a call on entry into the country’s retail space.
Foreign retailers, including American giant Walmart and French major Carrefour, have appreciated the bold step taken by the government in opening up the $590-billion retail sector. While Walmart and Bharti Enterprises, its Indian partner for the cash-and-carry venture, have announced that the JV will continue in multi-brand front-end stores too, Carrefour has pointed out it would maintain its ambitious plan for ‘other retail formats’, referring to front-end multi-brand stores. Domestic retail biggies, like Future group, are hopeful that the political logjam would get cleared within weeks.
The Opposition parties insisted that unless the government withdrew the FDI policy immediately, they would not let Parliament function. Opposition parties — with 205 MPs, excluding four MPs of the Shiromani Akali Dal which has been supporting the FDI decision — are depending on the collective might of the Bahujan Samaj Party, Samajwadi Party, Dravida Munnetra Kazhagam and All India Trinamool Congress (which together have 79 MPs in the Lok Sabha), to embarrass the UPA, in case there is voting on the issue after a debate in Parliament.
Speaking on the all-party meeting called by the PM to resolve the crisis in Parliament, Leader of Opposition in the Lok Sabha Sushma Swaraj said: “The government should roll back its decision tonight, so that Parliament can function from tomorrow.”
Apart from the Opposition parties and allies, some of the members with the Congress are also against the move.
The day started on a bad note for the government after Senior BJP leader Murli Manohar Joshi, Sharad Yadav of Janata Dal (United), Gurudas Dasgupta of CPI, Basudeb Acharia of CPI(M) and Dara Singh Chauhan of Bahujan Samaj Party gave notices for adjournment motion for a debate on the issue.
“The union government always tries that there is no voting in Parliament when an issue is being debated. That is laughable. The government should allow debate on policy issues to find out what is the view of Parliament,” said Leader of Opposition in the Rajya Sabha Arun Jaitley.
Meanwhile, at a meeting of an empowered committee of state finance ministers, Bihar Finance Minister Sushil Kumar Modi told reporters: “We will not accept any such store (foreign retailers) in the state. We believe that small traders will be immensely affected by such a move.”
Among other dissenting voices was that of West Bengal Finance Minister Amit Mitra, who said: “If small traders and farmers are affected through this policy, what will the government do.” Mitra, who had earlier favoured FDI in retail as the Ficci secretary general, cited a recent study conducted in England to show that mom-and-pop stores run by people from India, Pakistan and Bangladesh were severely affected by organised retail. Trinamool Congress leader and West Bengal Chief Minister Mamata Banerjee has already made her stand against retail FDI clear.
Gujarat, a state known for reforms, has also protested against retail FDI. Gujarat Finance Minister Saurabh Patel said the objective of investment was to give employment and help the state. FDI in retail would result in large-scale unemployment, he added.
Haryana Excise and Taxation Minister Kiran Chaudhary said: “We will do what is best for the state... We are yet to take a view.” Commenting on the current scenario, Ficci Secretary General Rajiv Kumar said: “The opposition is only political. FDI in retail was first talked about at the time of NDA government in 2003.”
Traders are gearing up for a nationwide shutterdown strike on December 1. Activists of Swadeshi Jagran Manch were seen burning the effigy of Finance Minister Pranab Mukherjee in some parts of the country.
While there were oppositions from different political quarters, India Inc remained firmly in support of the move. Aditya Birla Retail CEO Thomas Varghese, who also heads the CII retail chapter, said: “Progressive state governments that are concerned about inflation will go ahead and liberalise.”
Although the FDI policy rollout would be allowed only in 53 cities that population of more than one million, more than 50 per cent of these cities come under the rule of Opposition parties or UPA allies resisting retail FDI.
The FDI policy is only an enabling framework and remains the prerogative of the states to adopt.