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FDI in Retail: CAIT calls for Open Debate

 

Monday September 24, 2012

FDI, RETAIL, INDIA, ECONOMY, INVESTMENT, MARKET  
 

"It is an open fact that global retail giants are known for flouting the laws. Thus whatever conditions have been stipulated by the government of India in its recent FDI policy will go redundant because of self-certification conditions. Interestingly, such a facility of self-certification has not been given to any domestic company in any sector.

 

HNF Correspondent

 
 

Seeking an open debate on the issue of foreign direct investment (FDI) in retail sector, Confederation of All India Traders (CAIT) today said through a release that “The Government's notification of allowing FDI in Retail issued on 20th September speaks the fact that the Government is playing a game with the people of India as it has provided various concessions to foreign investor to pave and easy way for them to establish their business in Indian Retail Trade.” While criticising the UPA Government for such a step CAIT termed the notification as an attempt to mortgage the Indian Retail Trade at the hands of MNCs.

CAIT National President B. C. Bhartia and Secretary General Praveen Khandelwal today said that as per para 6.2.16.5 (vi)  the retail outlets of MNCs will be in cities with population of more than 10 lakhs.

 

But going a step further the notification authorises the MNCs to set up retail stores in the cities of their choice in such states which do not have population of 10 lakhs as per 2011 Census which means that MNCs will have a free hand to set up their retail stores anywhere in India. Para 6.2.16.5 (iv) mention that at least 30% of value of procurement has to be done from small industries with investment not exceeding US$ 1 million. However, great relaxation has been given to MNCs to meet this requirement in total purchase of first five years and not year wise which means that MNCs will be at liberty to outsource even 100% procurement from anywhere over the globe even from the starting year of their operations and later on to meet the requirement of procurement of 30% from small industries In other wards it is not mandatory for MNCs to procure at least 30% from Indian small industries right from 1styear. Vide Para 6.2.16.5 (v) most surprisingly, the MNCs have been allowed to self-certify the conditions stipulated in the policy. There will not be any Government mechanism to regulate whether these companies are complying with the condition mentioned in notification. It is an open fact that global retail giants are known for flouting the laws. Thus whatever conditions have been stipulated in the policy will go redundant because of self-certification conditions. Interestingly such a facility of self-certification has not been given to any domestic company in any sector.

The trade leaders further said that vide para 6.2.16.5 (iv) the Govt. has permitted to open front end retail stores immediately but has given a time period of 3 years to MNCs to develop backend infrastructure against the repeated statements of the Govt that development of backend infrastructure is first priority. Further, It is also not clear that whether these FDI’s will have to be owners of backend infrastructure or they will do it indirectly and claim that they have invested in it. Surprisingly establishment of cold storage and running of cold transport chain do not figure in list of backend infrastructure. Constantly the Government is referring to wastage of fruits and vegetables as a major issue and therefore seeking immediate requirement of Cold Storage but it appears that the same has been intentionally not referred to in the policy while defining backend infrastructure. It creates a major doubt on the intention of the Government.

Vide para 6.2.16.5(i)  the Govt. has allowed FDI in Multi Brand Retail Trade in all products but under disguise of fresh agriculture produce, it has permitted sale of grains and pulses in loose (unbranded) which is a major diversion from the earlier policy. This will directly attack the business of small Kirana Stores. This step has enough indication that the Government has a clear intention of allowing global players to do business in non- branded items also at a later stage.

Both Bhartia and Khandelwal said that under backend infrastructure, the policy has a mention of agriculture market produce infrastructure which is very dicey and needs to be defined. They further informed that considering the seriousness of the matter there shall be a meeting of the National Governing Council comprising of leaders of different States on 26th and 27th September at New Delhi to draw a strategy for future action to oppose the policy.

 
 

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