THE MINISTER OF COMMERCE AND INDUSTRY (SHRI ANAND SHARMA)
(a) to (e): A Statement is laid on the Table of the House.
STATEMENT REFERRED TO IN REPLY TO PARTS (a) TO (e) OF LOK SABHA STARRED QUESTION NO. 43,
FOR ANSWER ON 26TH NOVEMBER, 2012, REGARDING FDI IN RETAIL
(a): Yes, Madam.
(b): The policy, announced by the Government vide Press Note 5(2012 series), allows for
51% Foreign Direct Investment (FDI), in multi-brand retail trade, subject to the following
conditions:
i. FDI in multi brand retail trading upto 51% shall be allowed through the Government
approval route.
ii. Minimum amount to be brought in, as FDI, by the foreign investor, would be US $ 100
million.
iii. At least 50% of total FDI brought in shall be invested in `back-end infrastructure`
within three years of the first tranche of FDI, where ‘back-end infrastructure’ will
include 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, ware-house, agriculture market produce infrastructure etc. Expenditure on land
cost and rentals, if any, will not be counted for purposes of backend infrastructure.
iv. At least 30% of the value of procurement of manufactured/ processed products
purchased shall be sourced from Indian `small industries` which have a total investment
in plant & machinery not exceeding US $ 1.00 million. This valuation refers to the value
at the time of installation, without providing for depreciation. Further, if at any point
in time, this valuation is exceeded, the industry shall not qualify as a `small industry`
for this purpose. This procurement requirement would have to be met, in the first instance,
as an average of five years’ total value of the manufactured/ processed products purchased,
beginning 1st April of the year during which the first tranche of FDI is received.
Thereafter, it would have to be met on an annual basis.
v. Self-certification by the company, to ensure compliance of the conditions at serial
nos. (ii), (iii) and (iv) above, which could be cross-checked, as and when required.
Accordingly, the investors shall maintain accounts, duly certified by statutory auditors.
vi. Retail sales outlets may be set up only in cities with a population of more than 10
lakh as per 2011 Census and may also cover an area of 10 kms around the municipal/urban
agglomeration limits of such cities; retail locations will be restricted to conforming
areas as per the Master/Zonal Plans of the concerned cities and provision will be made
for requisite facilities such as transport connectivity and parking; In States/ Union
Territories not having cities with population of more than 10 lakh as per 2011 Census,
retail sales outlets may be set up in the cities of their choice, preferably the largest
city and may also cover an area of 10 kms around the municipal/urban agglomeration limits
of such cities. The locations of such outlets will be restricted to conforming areas, as
per the Master/Zonal Plans of the concerned cities and provision will be made for requisite
facilities such as transport connectivity and parking.
vii. Government will have the first right to procurement of agricultural products.
viii. The above policy is an enabling policy only and the State Governments/Union
Territories would be free to take their own decisions in regard to implementation of
the policy. Therefore, retail sales outlets may be set up in those States/Union
Territories which have agreed, or agree in future, to allow FDI in MBRT under this
policy. The list of States/Union Territories which have conveyed their agreement is
at Annex. Such agreement, in future, to permit establishment of retail outlets under
this policy, would be conveyed to the Government of India through the Department of
Industrial Policy & Promotion and additions would be made to the annexed list accordingly.
The establishment of the retail sales outlets will be in compliance of applicable State/
Union Territory laws/ regulations, such as the Shops and Establishments Act etc.
ix. Retail trading, in any form, by means of e-commerce, would not be permissible, for
companies with FDI, engaged in the activity of multi-brand retail trading.
(c): Government had instituted a study, on the subject of “Impact of Organized Retailing
on the Unorganized Sectorâ€, through the Indian Council for Research on International
Economic Relations (ICRIER), which was submitted to Government in 2008. The ICRIER study
indicated significant benefits for various stakeholders, such as consumers, farmers and
manufacturers, arising from the growth of organized retail. Based upon the study, as well
as the experience of other countries, it is the Government’s assessment that implementation
of the policy is likely to facilitate greater FDI inflows into front and back-end
infrastructure; technologies and efficiencies to unlock the potential of the agricultural
value chain; additional and quality employment; and global best practices. This, in turn,
is expected to benefit consumers and farmers in the long run, in terms of quality and
price. The 30% mandatory sourcing condition has been incorporated to encourage local
value addition and manufacturing. The increased level of activity, in the front-end, as
well as in the back-end, resulting from greater FDI inflows, is expected to create
additional employment opportunities for rural and urban youth. It is, further, expected
to encourage existing traders and retail outlets to upgrade and become more efficient,
thereby providing better services to consumers and better remuneration to the producers
from whom they source their products.
(d): The State Governments of Bihar, Karnataka, Kerala, Madhya Pradesh, Tripura, Odisha
and West Bengal have expressed reservations on the grounds of possible adverse effect on
farmers and small traders, job losses, displacement of small retailers and undermining of
traditional supply chains by the monopoly power of multinational retailers.
(e): The implementation of the decision taken by the Government on 24th November, 2011
to allow foreign direct investment up to 51% in multi brand retail, was put on hold for
evolving a broader consensus among key stakeholders. Consultations were held in this
regard with stakeholders, including traders’ associations; consumers’ organizations;
farmers’ representatives and associations; small & medium enterprises’ associations
and representatives; food processing industry representatives. The consultations brought
out views both for and against FDI in multi brand retail trading. On balance, however,
the discussions generally indicated support for the policy, subject to the introduction
of adequate safeguards. The necessary safeguards have, accordingly, been incorporated in
the policy and are expected to protect the interests of various stakeholders, including
small traders. Government has also decided to constitute a high-level group to make
recommendations on internal trade reforms, with a view to ensuring distributional
efficiencies and also that the benefits from trade are available to all sections of
society.
As part of the stakeholder consultations, the matter was also taken up with the State
Governments. The States of Delhi, Manipur, Assam, Uttarakhand, Haryana, Andhra Pradesh,
Rajasthan, Maharashtra, Jammu and Kashmir and the Union Territory of Daman & Diu and
Dadra and Nagar Haveli, have expressed support for the policy. Correspondence from some
other States indicates that they would like to consider the matter further. Since this
is only an enabling policy, the decision to implement the policy is left to the State
Governments.
ANNEXURE
ANNEXURE REFERRED TO IN REPLY TO LOK SABHA STARRED QUESTION NO. 43 FOR ANSWER ON 26.11.2012.
LIST OF STATES/ UNION TERRITORIES REFERRED TO IN RESPECT OF PART (b)
(viii) OF LOK SABHA
STARRED QUESTION NO. 43, FOR ANSWER ON 26TH NOVEMBER, 2012, REGARDING FDI IN RETAIL
1. Andhra Pradesh
2. Assam
3. Delhi
4. Haryana
5. Jammu & Kashmir
6. Maharashtra
7. Manipur
8. Rajasthan
9. Uttarakhand
10. Daman & Diu and Dadra and Nagar Haveli (Union Territories)
