Walmart, Tesco seek assurance on non-reversal of FDI policy

Global retailers like Walmart and Tesco have sought assurance from India that any change of governments at both centre and states should not result in reversal of FDI policy in multi-brand segment, before taking investment decisions in the country.

Bentonville-based Walmart has also raised apprehensions about the ongoing probe by investigating agency Enforcement Directorate, said an internal note of the Department of Industrial Policy and Promotion.

"Some prospective foreign investors have discussed their plans for investing in multi-brand retail trading in India. They have generally conveyed that they have to address (certain) apprehensions of their Boards while taking the investment decisions," the note said.

The main issue raised by Walmart and Tesco was that ‘the next government could reverse the MBRT policy.

“States which have at present opted for opening of front-end stores in their territory can opt out at a later stage".

The general elections in India is expected to be held next year.

Earlier this year, the main opposition party Bharatiya Janata Party's national president Rajnath Singh had said that the party would reverse the United Progressive Alliance government's decision to allow FDI in retail if voted to power in the general elections in 2014.

When contacted on the matter, a Walmart India spokesperson said:

"We continue to work with the government of India to better understand the rules that exist for FDI and we appreciate the government's willingness to consider our requests for clarity on conditions contained in the new FDI policy".

On the other hand, a Tesco spokesperson said: "We are reviewing the DIPP clarifications to understand the implications".

After the government cleared 51 per cent FDI in MBRT last year, only 11 states have so far agreed to allow foreign retailers to open stores.

The DIPP had recently issued clarifications regarding FDI in MBRT under which foreign retailers entering India's multi-brand segment will not be allowed to franchise their stores and will have to put 50 per cent of their investments in back-end infrastructure, specifically for the chain they are setting up.

Walmart currently has a 50:50 cash and carry joint venture with Bharti Group, whereas Tesco had entered into a partnership with Tata Group firm Trent in 2008 for providing back end support to the latter.