Govt to allow 51% FDI in multi-brand retail: Cabinet note

In a historic decision the Union Cabinet on Thursday allowed 51 per cent FDI in retail trading.

According to a top secret note of 120 pages that was circulated to 19 Union ministries, several conditions were attached to liberalisation of the foreign investment policy regime.

The Manmohan Singh-led UPA government plans to gradually expose trade and industry to foreign investment so that the Indian industry is ready to face this challenge over a period of time.

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Proposals to permit FDI in multi-brand retail trading in all products, in a calibrated manner, subject to the following conditions:

1. FDI in multi-brand retail may be permitted to the extent of 51 per cent with government approval.

2. Minimum amount to be brought in as FDI by a foreign investor would be around $100 million.

3. At least 30 per cent of the procurement of manufactured processed products shall be sourced from small industries, in the country, that have total investment in plant and machinery not exceeding $100 million.

4. The government will have the first right to procurement of agriculture products.

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5. Fresh agricultural products, including fruits, vegetables, flowers, grains, pulses, fresh poultry, fishery and meal products may be unbranded.

6. At least 50 per cent of the total FDI brought in shall be invested in back-end infrastructure. Back-end infrastructure will entail capital expenditure on all activities, excluding that on front-end units.

For instance, back-end infrastructure will include investment made towards processing, manufacturing, distribution, design improvement, quality control, packaging, logistics, storage, warehouse, agriculture market produce, infrastructure, etc.

7. This valuation refers to the value at the time of installation without providing for depreciation.

8. Further, if at any point in time, this valuation is exceeded the industry shall not qualify as a small industry for this purpose.

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9. Expenditure on land cost and rental, if any, will not be counted for purposes of back-end infrastructure.

10. Self-certification will be done by the company to ensure compliance of all the conditions.

11. Retail sales locations may be set up only in cities with a population of more than 10 lakh (1 million) as per 2011 Census and may also cover an area of 10 km around municipal urban agglomeration limits of such cities.

12. Retail locations will be restricted to areas as per the master zonal plans of the cities concerned and provisions will be made for requisite facilities such as transport connectivity and parking.

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Single-brand retail

On single-brand retail, the note says, 'It is also proposed to permit 100 per cent FDI in single-brand retail trading, subject to the following conditions:

1. FDI in single-brand retail trading may be permitted with government approval.

2. Products to be sold should be of single-brand only.

3. Products should be sold under the same brand in one or more countries, other than India.