The Union ministry of food and consumer affairs feels the suggestions of every state are needed before deciding on allowing foreign direct investment (FDI) in multi-brand retailing.
While an internal committee has been formed by the ministry for analysing the feedback received on the draft note in this regard from the Department of Industrial Policy and Promotion (DIPP) of the ministry of commerce on organised multi-brand retail, the ministry has started a parallel exercise to collate the views of different states.
DIPP was in favour of moving forward on the idea. In a recently held meeting of all state food secretaries, the ministry of food distributed terms of reference for getting their views on the DIPP draft.
"This has become imperative after the parliamentary committee has intervened and given its view. As per the concerns raised by the parliamentary committee, the matter is not whether or not to allow FDI in multi brand retail but to prepare a constitutional framework in which all stakeholders are consulted before the decision is made.”
Heeding MPs’ concerns
The 90th report of Parliament’s standing committee on commerce has raised concerns on unemployment due to a slide-down of indigenous retailers, sidelining of consumers’ welfare due to predatory pricing by retail giants and recommended a ban on large domestic corporate houses and foreign retailers from entering retail trade in groceries, foods and vegetables. It wanted a policy to re-employ dislocated people and preparation of a legal and regulatory framework and an enforcement mechanism to prevent unfair means of competition, besides setting up a Retail Regulatory Authority to act as a whistle-blower.
"If the decision is whether or not to allow FDI, it is a mandate of the ministry of commerce. But if the issues raised by DIPP itself on compliance, penalty, conditionalities for multi-brand retail in the rural sector, allowing FDI for such stores only in cities, protection of small retailers under the Shopping Mall Regulation Act, ensuring the public distribution system, etc, are to be handled, participation of states is mandatory. Internal retail trade in any commodity is a state subject and the Centre cannot on its own deal with this issue. Ultimately, it is the state which has to ensure compliance and monitoring," said a highly placed official in the ministry.
"A legal framework and proper regulator needs to be worked out to ensure compliance. At present, there is no umbrella central law for multi-brand retail. Every state has its own ways of governing. If compliance and penalties are to be decided, then it should be with reference to some law and there is none now,” explained the source.
Among the views received till date, while Left-ruled states such as West Bengal and Kerala have rejected the proposal for opening multi-brand retail to FDI, Punjab and Karnataka have favoured the idea, albeit with conditions.
The ministry is also proposing that 75 per cent of FDI be invested in back-end infrastructure logistics, logistics and agro processing. It has also recommended that FDI increase the capital of the Indian venture and not only subscribe to the existing capital to the extent of the FDI allowed. Besides, the money should not be used only in working capital of the company but also in capital requirements. "Even if till date we have looked into the issue of lock-in period in this FDI, these clauses would work as sufficient norms to ensure the investment is long term," sources explained.
