The Department of Industrial Policy and Promotion (DIPP) under the Ministry of Commerce and Industry has decided to keep a close watch on foreign direct investment (FDI) in wholesale retail. At the same time, it is open to revisiting the 25 per cent sales cap by foreign players to their partner companies in the cash-and-carry business.
“The cap has been put keeping in mind the concerns of all stakeholders. But this does not rule out the provision of revising it at a later stage,” a senior government official told Business Standard. The new FDI policy would come up for review in September.
On March 31, DIPP released a single document narrating the country’s FDI norms, in which it had mentioned that wholesale trade of goods would be allowed only among companies of the same group. But, such wholesale trade to group companies taken together should not exceed 25 per cent of the total turnover of the wholesale venture and should be meant only for internal use.
This came as bad news for expansion plans of conglomerates like Metro AG, Bharti-Walmart and Tesco. The entry of French retail giant Carrefour in partnership with Kishore Biyani’s Pantaloon Retail has also hit a major roadblock with such a ruling. “The concern of various departments is that FDI in retail should not come in the garb of wholesale cash-and-carry business. There are several loopholes in the policy which would be addressed by putting the cap,” the official said.
According to the current norms, 100 per cent FDI is permitted in the wholesale cash-and-carry trade but it is not allowed in retail selling to consumers directly. Wholesale trading firms, owned by foreign entities, can only sell their merchandise to retailers, hotels, restaurants and the unorganised sector.
The agriculture ministry had earlier raised concerns that foreign retailers were entering the Indian market in the guise of wholesale business. The parliamentary standing committee on commerce has also asked for a complete ban on FDI in retail.
