Under political attack, the government on Friday put out a strong defence of its decision to allow up to 51 per cent foreign direct investment in multi-brand retail and up to 100 per cent in single-brand retail.
The move, it said, would generate about 10 million jobs over three years and help farmers get more for their produce, while dampening the prices of products. Among those who have refused to go along is the Trinamool Congress, whose members are part of the Union council of ministers.
Commerce & industry minister Anand Sharma told reporters the implementation guidelines would be issued in a week. He said those opposing the decision were not thinking of India's interests, particularly of farmers. He said the move had been customised to suit India's interests, reiterating the conditions allowed, such as a minimum investment of $100 million, with half to be invested in back-end operations such as cold storages and 30 per cent of the sourcing to be done from micro, small and medium enterprises (MSMEs).
| THE DEFENCE |
| * 4 mn jobs in areas like sorting, packaging etc; 4-5 mn in logistics |
| * India lacks cold storage chains. Only 5,386 standalone cold storages; 80% used only for potatoes |
| * Around 35-40% of perishable farm produce gets rotten in post-harvesting period. Loss estimated at Rs 1 lakh cr |
| * Cent per cent FDI permitted in cold-chain; investment not significant due to absence of front-end retail |
| * Farmers get only up to one-third of what consumers pay in foodgrains. Realise just 12-15% of what consumers pay for vegetables and fruits |
| * Companies will source from the micro, small and medium enterprises sector, which will have multiplier impact on the industry |
He noted that as much as half of all perishable farm produce rots away, post-harvest, due to lack of cold storage. This and a multi-layer of intermediaries result in farmers getting only a third of the price of the final products in the case of foodgrains and just 12-15 per cent in the case of fruits and vegetables.
It is interesting to note here that the Shiromani Akali Dal, with a strong base in rural Punjab, has broken ranks with the other opposition parties on the issue and has supported the government move.
Where, he asked, came the notion that small retail traders would be wiped out? China, Indonesia, Thailand, Malaysia, Russia, Brazil, Argentina and Chile all have a booming small-scale retail sector, and they’d opened FDI to 100 per cent several years earlier. “You visit Beijing, Kuala Lumpur, Jakarta and find that markets are full of small retail players,” he said. .
There are only 53 cities in India with a population of over a million people and, hence, qualified under the rules for attracting FDI in multi-brand retail, he said. West Bengal had only three such cities.
Besides benefiting farmers and consumers, around 10 million jobs would be created in three years, he claimed. “Various kinds of work, like sorting, will be given to rural folk. I believe four million jobs would be generated this way. Besides, five to six million jobs would be created in logistics over three years,” he added.
With competition, prices of final products are also likely to come down, benefiting consumers, he said. Prices, farmers and employment are not only economic parameters but key emotive issues in India, where a large population is still engaged in agriculture, he noted.
He similarly defended the Cabinet decision to raise the level of FDI allowed in single-brand retail to 100 per cent from 51 per cent, saying companies already in would invest more once the decision was implemented.
On whether the 30 per cent sourcing from the MSME sector could be done from abroad as well as here, since there was no stated restriction on sourcing only from India, Sharma said the government could not make any rule in breach of its obligations under the World Trade Organisation treaty. On what was the guarantee that FDI in multi-brand retail would not, in due course, increase to 100 per cent, as had happened with single-brand retail, he gave none.
He said only $44 million had come in so far into single-brand. While, he believed, billions of dollars would flow into India in the case of multi-brand retail.
Ultimately, he added, since it was state governments which would give a licence, the extent of FDI coming into the sector would depend on them.
