51% FDI in retail of single brands

The Union Cabinet tonight approved 51 per cent foreign direct investment in single-brand retailing. However, all FDI proposals will have to be approved by the Foreign Investment Promotion Board.

Briefing reporters after the meeting, Commerce and Industry Minister Kamal Nath said the move to allow FDI in single-brand retailing was a standalone measure and not a prelude to allowing FDI in retail trade across the board.

"This (allowing FDI in single brand) is to attract investment in an area which is already happening. We will soon frame the guidelines for this," he said adding that the larger issue of allowing FDI in retail trade was still being examined by the government.

Asked if the Left parties had been consulted on the issue, Nath said, "There is no element of concern here. The Left concern is not FDI, but the large retailer versus the small retailer."

FDI in single brand as this does not displace the small retailers," he added. An official statement said the move would imply that foreign companies would be allowed to sell goods sold internationally under a single brand like Nike, Reebok or Adidas.

Retailing of multiple brands, even if such products are produced by the same manufacturer, would not be allowed, it added.

In addition to allowing FDI in single brand, the cabinet also decided to allow 100 per cent FDI for distillation and brewing of potable alcohol, industrial explosives and hazardous chemicals.

FDI up to 100 per cent through the automatic route has also been allowed in case of power trading, greenfield airports, laying of natural gas and LNG pipelines, cash and carry wholesale trading and exploration of mining of diamonds and other precious stones and processing and warehousing in coffee and rubber industry.

The cabinet also hiked the FDI cap to 100 per cent in case of investment in creation of infrastructure related to marketing in petroleum sector, captive mining of coal and lignite for consumption by eligible users.

In addition to this, the divestment clause requiring the foreign investor to divest 26 per cent in favour of the Indian partner within five years has been done away with in the case of B2B e-commerce.

Interestingly, the divestment clause has been retained for the tea plantation sector on the grounds that discussions were required to be held with the labour unions in the sector.

The approval of the FIPB would also no longer be required for the transfer of shares in an existing Indian company from Indian investors to foreign investors, even in cases where the provisions of the Securities and Exchange Board of India are applicable and where approval of the RBI is also required.