FDI in multi brand retail – Discussion Paper


The Department of Industrial Policy and Promotion has conducted this discussion in July 2010.

7.1 Should FDI in multi brand retail be permitted? If so, should a cap on investment be imposed? If so, what should this cap be?

7.2 To develop the retail trade in food grains, other essential commodities and multi-brand retail in general; should FDI be leveraged for creating back-end infrastructure? To ensure that foreign investment makes a genuine contribution to the development of infrastructure and logistics, should it be stipulated that a percentage of the FDI coming in (say 50%) should be spent towards building up of back end infrastructure, logistics or agro processing?

7.3 It is necessary to encourage only genuine players in this sector and avoid a situation where retail outlets are run through working capital support from financial institutions. Should a minimum threshold limit for investment in backend infrastructure logistics be fixed? If so, what should this financial threshold be?

7.4 To develop our rural sector, should conditionalities be put on the FDIfunded chains relating to employment? For example, should we stipulate that at least 50% of the jobs in the retail outlets should be reserved for the rural youth?

7.5 Similarly, to develop our SME sector through local sourcing, should we stipulate that a minimum percentage of manufactured products be sourced from the SME sector in India?

7.6 How best can small retailers be integrated into the upgraded value chain? Can they be provided access to the logistics/ supply chain set up by the FDI funded retailers? Should it be stipulated that a minimum percentage of the latter’s sales should be made to retailers through special wholesale windows?

7. 7 As a part of a calibrated reform process, should foreign investment for such stores be initially allowed only in cities with population of more than 10 lakhs (2001 census)? As there may be difficulties faced with regard to availability of real-estate in such cities for setting up such ventures, should an area of 10 kms around the municipal/urban agglomeration limits of such cities be included within the definition of the city?

7.8 Will any of the conditionalities mentioned above be inconsistent with our commitments under the agreement on TRIM at WTO? If not, to ensure national treatment, can such conditionalities be extended to all retail chains in India above a certain size? Will such extended conditionalities be consistent with Article 301 of the Constitution?

7.9 What additional steps should be taken to protect small retailers? Should an exclusive legal and regulatory framework be established to protect their interests? Is a Shopping Mall Regulation Act required? Does this require intervention at national level or should this be left to the States?

7.10 The present public distribution system provides a valuable safety net to vulnerable sections of society. To ensure that the integrity of the PDS system is not
weakened and buffer stock is maintained at the desired level, should Government reserve the right of first procurement for a part of the season or put in place a
mechanism to collect a certain amount of levy from private traders in case the level of buffer stock falls below a certain level?

7.11 How should compliance be ensured with the above stipulations? Should a centralised agency, to be nominated by the State Governments concerned, be
empowered to grant permissions to every outlet to be opened? The onus of proving compliance with these conditions could rest with the concerned retail chain. The
chains could submit an annual statement to such State Government agency providing proof of compliance. Should this agency be empowered to monitor
compliance of the present cash and carry outlets too?

7.12 The penalty for non compliance could include cancellation of approvals as well as denial of future permissions for such activities. What additional penalties could be levied? Should civil penalties be imposed? Or criminal? Or both?

Source:http://dipp.nic.in/DiscussionPapers/DP_FDI_Multi-BrandRetailTrading_06July2010.pdf.

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