Concessional duty benefits for capital goods imports by retailers

FOREIGN TRADE POLICY/ RETAIL

Speciality retail chains with sizeable foreign clientele are likely to benefit

The commerce minister's proposal in the Foreign Trade Policy to extend concessional duty benefits under the EPCG scheme to the retail sector for the import of capital goods is unlikely to help organised retailers in any significant way.

Large retailers like Shoppers' Stop and Pantaloon pointed out they would have to generate sales at their stores through foreign exchange in order to benefit from the scheme.

"Tourists and non-resident Indians who spend foreign exchange in the country do not buy grocery, branded apparel or consumer durables in India. So there is no question of any of the existing modern retailers availing of the concessional duty benefits," said Arvind Singhal, chairman, KSA Technopak.

Specialty retail chains like Fab India or Nalli Silks, and those which sell carpets and artifacts, having a sizable foreign clientele, are likely the ones to benefit.

But industry sources pointed out that in order to beef up its supply chain systems, the modern retail sector needed to import cold storage equipment and refrigerated trucks.

"These are not the systems a Fab India or a Nalli would require to import. In that sense, this proposal would be misdirected," added Singhal. According to Kamal Nath, commerce minister, the new proposal is intended to equip large domestic retailers to scale up and take on global competition.

The proposal says retailers with more than 1,000 square feet of covered shopping space, shall fulfil the export obligation under the scheme from payments received against 'counter sales' in free foreign exchange through banking channels as per Reserve Bank of India guidelines.