Walmart's UP, Uttarakhand plans: Expansion depends on clarity in FDI rules

International retailers argue that clarity in FDI rules regarding 'food plus' segment must

For multi-national retailers such as Carrefour, Auchan and Walmart – who have for long had a blow hot, blow cold relationship with India – expansion in the country depends a lot on how the foreign direct investment (FDI) rules in retail finally shape up, experts said.

While there have been reports that Walmart might just further expand in India and open as many as 50 cash and carry stores, with a chunk of them in Uttar Pradesh and Uttarakhand, industry insiders said that the next phase of expansion would depend on how the government handles the ‘food plus’ component in FDI in retail.

Sources said Walmart's cash and carry strategy would continue and stores would be opened according to the plans.
 

While Auchan recently sent a scouting party all the way from France to look at the retail situation in the country and feel the pulse of the government, Walmart has for long tried to reason it out and show that they are open to working in tandem with the various ministries to fulfill their long standard wish to operate in the B2C retail space in India.

However, the ever-changing rules and the government's inability to find the right mix that would keep international retailers, Indian retailers and mom and pop store owners happy has made the task of bringing global players to Indian shores increasingly difficult.

Last year in February, the government opened the food trading sector to foreign investment with 100 per cent FDI. However, international retail players said that just having food-only stores was not a viable option. 

   

Industry insiders said that while global players, including Walmart, might be in talks with the government and even have plans around expansion, no one would take any concrete steps before the government clarifies its rules around FDI in the retail and food plus component. Also, the government is talking about allowing just made in India products at the stores and retailers have concerns about that as well.

“The percentage of food plus needs to be decided first. It would not make sense for any of us to start retail chains if it is less than 25 per cent. We cannot just sell food products while the big Indian retailer next door is selling everything from a pack of biscuits to flat screen televisions. To begin with, at least some FMCG (fast-moving consumer goods) and kitchen products should be allowed at our stores,” said a senior official of an international retail chain.

Sources said that the government plans to hold discussions soon around how global players can enter India via the food plus route and the percentage that might sway the deal in their favour. Also, retailers want a plan around how much the food plus component could be expanded by and by when.

However, industry experts said that there is no clarity around food plus and only a brand new policy is a way to go. “There is absolutely no clarity around food plus. What we need is a whole new policy that would help India benefit from this great opportunity,” said Arvind Singhal, chairman and managing director of Technopak.