Amid opposition, India declares retail trade open

New Delhi: The government Friday formally announced its decision to allow foreign equity in multi-brand retail industry despite strong protests by the opposition parties which also forced an adjournment in both houses of parliament.

Commerce Minister Anand Sharma formally communicated the decision taken by the cabinet Thanksgiving Thursday, presided over by Prime Minister Manmohan Singh, allowing up to 51 percent foreign equity in multi-brand retail and 100 percent in single-brand format.

Addressing a press conference here, Sharma said the decision was taken after a year-long debate and consultations with all stakeholders in the most transparent and democratic manner. Comments were invited and examined over since July last year, he said.

"The minimum investment in multi-brand retail will be $100 million. This is minimum, and not the maximum. Fifty percent will be in developing rural infrastructure and 30 percent of sourcing will be from small and medium enterprises," Sharma said.

These mega stores will only be allowed in cities with a population of over one million. Out of the 8,000 towns and cities in India only 53 cities fall under this category, the minister said, adding the guidelines of the new policy will be notified next week.

Even as the minister was explaining the finer points of the policy, stocks of domestic retailers were virtually on fire. Kishore Biyani-promoted Pantaloon soared 18.94 percent, while Vishal Retail jumped 19.89 percent and hit the circuit.

Incidentally, the press conference was held soon after both houses of parliament were adjourned for the day after protests led by the Bharatiya Janata Party (BJP) and the Left Front. The Left parties are also planning to move an adjournment motion on the issue.

But Sharma defended the government's decision and said foreign retail chains would bring much needed investment for efficient supply chain and back-end infrastructure like cold storage which the country lacks, causing 40-50 percent wastage of fruits and vegetables.

India produces about 195 million tonnes of vegetables alone.

The minister also said mega retail chains will procure products directly from farmers, giving them better remuneration for their produce as the number of intermediaries will come down drastically.

"Half of what the farmers produce is lost. It never reaches the markets. In addition, the farmer gets less than one-third of the price of food grain which the consumer pays. In the case of fruits and vegetables, the farmer gets 12-15 percent," Sharma said.

"There is a long chain of intermediaries, but no value chain," he said, adding: "We have limited storage capacity, 80 percent of cold storages is taken only to store potatoes." To maintain food security, the government will have the first right of procurement.

Sharma also pointed out that millions of jobs will be created as more players came into the sector, with four million new vacancies expected to open up in the agri-processing segment and five million jobs in the logistics sector.

As regards opposition from among the United Progressive Alliance (UPA) allies, Sharma said he had himself explained the advantages to Trinamool Congress president and West Bengal Chief Minister Mamata Banerjee after she expressed reservations on the issue.

"The centre has the right to frame policies as the issue of foreign equity in retail is under the concurrent list of our Constitution. It is the states that finally have the right to allow or reject any proposal," said Sharma.

He also sought to point out that other emerging markets like China, Indonesia, Thailand, Malaysia, Russia, South Africa and Brazil had also allowed foreign investment in multi-branded retail, in a move that had benefited the masses there.
 

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Picture of the Day

The Prime Minister, Dr. Manmohan Singh and the Emeritus Senior Minister, Mr. Goh Chok Tong, unveiled the bust and the Marker of Pt. Jawaharlal Nehru, at Asian Civilizations Museum, in Singapore on November 20, 2011.

(Photo: M. Asokan )