Cabinet note soon as Committee of Secretaries irons out issues raised by some ministries.
Foreign direct investment in multi-brand retail has moved a step closer to reality, with the Committee of Secretaries (CoS) agreeing to withdraw some of the conditions found onerous by some ministries as well as industry.
The CoS had last month given its in-principle nod to FDI in multi-brand retail, but diluted some of the stiff conditions. The final decision of the secretaries will be the basis for drafting a cabinet note by the department of industrial policy and promotion (DIPP).
One of the key conditions was multi-brand retail outlets be opened only in states that agreed with the new policy. That has been dropped after the ministry of commerce and trade and some other ministry representatives attending the CoS meeting said, “There is no need to add any regulatory burden on state governments, as the issue of FDI is formulated and administered by the Central government”. It was also felt that states, in any case, had powers under the Constitution to regulate “trade and commerce” within their territory and a rider was not needed at all.
The secretaries have also dropped the clause that at least 30 per cent of the turnover of these ventures be from sales to small traders through a wholesale cash and carry set-up. Most CoS members were of the view it would be difficult to monitor. The department of economic affairs also contended the clause could lead to harassment through continuous inspection.
The DIPP felt the condition would also not be compliant with India’s commitment under the agreement on Trade Related Investment Measures. It was agreed in the meeting that in order to protect the interests of certain sectors — agriculture, food processing, electronics, small and medium units, etc — the DIPP would consider special provisions.
Another rider decided in the earlier meeting — reservation of a minimum percentage of jobs for rural youth — has been scrapped as the consensus was it would be difficult to impose. A suggestion by the labour ministry to ask companies to make an assessment of the number of jobs to be created or lost before seeking approval was also not accepted.
The CoS has also simplified procedures on some other key riders, one of which says 50 per cent FDI should be in back-end infrastructure. It has now been decided it will be accepted on the basis of self-certification by the company so that there is no harassment during monitoring. It was also agreed companies would be asked to maintain accounts certified by a chartered accountant. Also, FDI in multi-brand retailing up to 51 per cent would cover the sale of unbranded products, such as agricultural products.
To avoid ambiguities, it was decided the DIPP would come out with a clear definition of “back-end infrastructure.” A clause has been added that the government would urge states to expedite reforms in the Agricultural Produce Marketing Committee Acts so that agricultural commodities can reap the full benefit of FDI in multi-brand retail. Though the micro, small and medium enterprises ministry and the department of consumer affairs preferred 49 per cent FDI to begin with, the finance ministry, the department of commerce, the DIPP and the statistics and programme implementation ministry pushed the 51 per cent cap through.
CoS also arrived at a consensus on allowing FDI in multi-brand retail in cities with more than one million population, though there was an alternative suggestion to include all Tier-II cities.
However, as there are 51 cities with a population of more than one million, based on the 2011 census, it was decided to go ahead with the policy. There was also a consensus that considering investors might not find enough land in city limits, an area of 10 km around the municipal or urban agglomeration limits of cities be accepted as a permissible location for retail stores.
