Govt shows resolve; FDI in retail comes into effect

New Delhi:Unfazed by opposition even from its own allies, government today went ahead implementing its decisions to allow FDI in multi-brand retail and liberalise foreign investment in aviation and broadcasting sectors.

On a day opposition parties enforced a nation-wide bandh in which allies SP and DMK participated, government came out with notifications implementing its reforms decisions taken last week.
While TMC, the second largest UPA constituent, is all set to withdraw its support and pull out its ministers tomorrow, SP and DMK have also opposed these policies.
Under the notification relating to FDI in multi-brand retail, multinational companies can invest up to 51 per cent to open stores in 10 states and UTs which have so far agreed to implement the decision.
“51 per cent FDI in multi-brand retailing, in all products, will be permitted …,” a notification by the Department of Industrial Policy and Promotion (DIPP) said. It said the decision will take immediate effect.

The government also operationalised September 14 Cabinet decisions allow 49 per cent FDI by foreign airlines in the domestic carriers and relax sourcing norms for foreign retailers investing beyond 51 per cent in single-brand retail. In the most controversial area of FDI in multi-brand, the the DIPP said the State Governments and UTs would be free to take their own decisions.

“Therefore, retail sales outlets may be set up in those StatesUTs which have agreed, or agree in future, to allow FDI in MBRT (multi-brand retail trading) under this policy.” Minimum amount to be brought in by the foreign investor would be USD 100 million and outlets may be set up only in cities with a population of more than 10 lakh. At least 50 per cent of FDI in multi-brand retail should be in ‘back-end infrastructure’ within three years of the first tranche.
Investments in the aviation sector would be made under the government approval route and the parties need to comply with regulations of Securities and Exchange Board of India.

Earlier, no foreign airline was allowed to invest in Indian carriers directly or indirectly. Besides, the decisions on permitting 49 per cent FDI in power exchanges and increase in foreign equity cap from 49 per cent to 74 per cent in the service providers like DTH in broadcasting sector have also been notified.

On multi-brand retail front, only 10 states and UTs have so far agreed to FDI. These are Andhra Pradesh, Assam, Delhi, Haryana, Jammu & Kashmir, Maharashtra, Manipur, Rajasthan, Uttarakhand, Daman & Diu and Dadra and Nagar Haveli.

Major states like Uttar Pradesh, Tamil Nadu, West Bengal and Gujarat are opposing FDI in retail.

The major domestic retailers welcomed the decision.

Future Group CEO Kishore Biyani said, “Finally FDI is here. So, that is a very good news. There is no threat to us from foreign retailers.”

Aditya Birla Group, Business Director (Apparel & Retail Business) Pranab Barua said, “We have to still wait and watch what happens at the state level. This will help the sector.”

Diluting the earlier norms in the single-brand retail, the DIPP said the 30 per cent sourcing by the global firms “will be done from India, preferably from MSMEs, village and cottage industries, artisans and craftsmen, in all sectors”.

Swedish retailer IKEA, which planned to invest Rs 10,500 crore in India, had sought relaxations in this regard.