Ministry for 49% FDI in multi-brand retail

Amid a debate within the government on allowing foreign direct investment in multi-brand retail, the nodal consumer affairs ministry is insisting on a foreign direct investment cap of 49 per cent in the sensitive sector, sources said.

"Starting with 49 per cent FDI in the sector would be a safe thing," a senior consumer affairs ministry official told PTI.

However, the Department of Industrial Policy and Promotion, which is piloting the proposal for the politically sensitive sector, is in favour of a majority stake (51 per cent) for foreign retail chains, with set-up conditionalities.

Prime Minister Manmohan Singh, in his interaction with editors yesterday, said there is a "big debate about it" in government and Parliament.

"There is fear of small traders, but without breaking such institutional barriers, there is fear of food inflation. I am hoping we can make a beginning in these areas. These are some of the ideas that are uppermost in my mind," Singh said.

The other big area of inter-ministerial differences relate to the minimum limit set for investment.

Of the $100 million (about Rs 450-460 crore) minimum investment proposed by the DIPP, at least 50 per cent has to be earmarked for back-end infrastructure like cold storage, soil testing labs and seed farming.

However, the consumer affairs ministry wants a larger share of 75 per cent of multi-brand retail FDI to be invested in back-end supply chains.

"As India's back-end infrastructure is weak, the foreign investor should invest at least 75 per cent of the $100 million in it," the official said.

While the DIPP has floated another discussion paper on the subject, a Committee of Secretaries is going through the issue and is expected to meet again soon.

The industry ministry has also proposed that multi-brand retail giants like Wal-Mart, Carrefour and Tesco may be allowed only in the 36 large cities which have population of over 1 million, according to the 2001 census.

Retail giants like US-based Wal-Mart and French Carrefour are very keen to enter the segment.

Bharti Enterprises and Wal-Mart Stores entered into a joint venture in August, 2007, and started cash-and-carry stores named 'Best Price Modern Wholesale' in 2009.

At present, 51 per cent FDI is permitted in single brand retail, while 100 per cent is allowed in the wholesale cash-and-carry segment.