With the department of industrial policy and promotion (DIPP) and the department of commerce locking horns over allowing fresh foreign investment in the retail sector, the issue has now been referred to the group of ministers (GoM) on FDI headed by Union finance minister Yashwant Sinha for further perusal.
The proposal sent to the GoM has been left open-ended. The normal procedure is that the DIPP after consulting other administrative ministries sends a concrete proposal on the FDI limit to be permitted and whether it can be routed through the automatic (RBI) route.
While the DIPP is in favour of a minority shareholding for foreign investors, the commerce department is opposed to any idea of liberalisation.
At present, fresh FDI is not permitted in the retail segment. However, firms which have brought in FDI as per earlier liberal policies, are allowed to continue with the existing foreign investment component.
Transnational retail giants are now opening up stores in the cities through franchise arrangements with Indian promoters.
These are likely to turn into company-owned businesses once FDI is permitted.
A government source said that the DIPP has only collated the comments from the various ministries and has not suggested any FDI limit.
It has, however, said it is in favour of allowing fresh FDI in the sector.
But the department of commerce has rejected the suggestion. It feels that allowing FDI in retail may lead to large-scale imports and sourcing of local goods from small manufacturers in India at low prices and selling them at higher prices.
This will have a severe impact on not only the producers, but also on the end-users.
The commerce department, which has been vehemently opposing the move, is also against large scale imports of goods that can be manufactured in India.
It could not be ascertained when the next meeting of the GoM is scheduled.
But there is a perception that the GoM may finally give the go-ahead to FDI in retail in view of the retail explosion in a certain section of the industry.
A retail boom will give a fillip to the consumer goods industry and also create large- scale employment. However, an organised retail sector may have an impact on the unorganised (local shop-owners) retailing industry especially in the metros.
The GoM is headed by the finance minister and constitutes the commerce and industry minister Murasoli Maran, communications minister Pramod Mahajan, external affairs minister Jaswant Singh, chemicals and fertiliser minister SS Dhindsa and small-scale industries minister Vasundhara Raje Scindia.
Among them, the only direct opposition is likely to come from Maran, the sources said.
