The conditions mooted by the committee of secretaries (CoS) on foreign direct investment (FDI) in multi-brand retail could act as a “damper” for foreign investments in retail, said Noel N Tata, vice chairman of Tata Group’s retail arm, Trent.
Recently, Tesco Plc, the third largest retailer in the world which has a franchise agreement with Trent, expressed similar views saying that it would be difficult to implement the conditions being reported in the media.
“Eventually FDI must be allowed in India. It is in the interests of the consumers... but the conditions could act as a damper,” Tata said in a reply to a shareholder’s question at Trent’s annual general meeting today.
After approving 51 per cent FDI in multi-brand retail, the CoS has reportedly suggested stringent conditions for foreign retailers, including a minimum investment of $100 million, mandatory investment of at least 50 per cent in back-end infrastructure, minimum sales of 30 per cent to come from small traders and 30 per cent mandatory sourcing from small and medium enterprises.
Though the Cabinet committee on Economic Affairs, the final decision making body on the matter, is yet to clear the riders, the proposals are said to be the basis for the final policy decision.
Some Indian retail majors said more clarity was required on the conditions mooted by the CoS.
“Monitoring things such as mandatory sourcing from SMEs, capital flows into back end and sales to small traders will be a challenge. There would have to be a strong monitoring mechanism to track whether these conditions are being followed,” said Bijou Kurien, president and chief executive officer, lifestyle, Reliance Retail.
Ratan Tata pins hope on new OEH management
The change in senior management at Orient Express Hotel, the Bermuda-headquartered hospitality major, has rejuvenated Indian Hotels Company’s (IHCL) hopes of forging an alliance with it — something the Indian company has been pursuing for more than three years.
IHCL Chairman Ratan Tata said: “We made an investment in Orient Express because the hotel chain shared many of the prime properties we wanted. We thought the two companies could come together and we would be in a position to manage some of their hotels. Our hope is still with the new management of the Orient Express.”
