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New Delhi, July 1: The Centre plans to give a big push to foreign direct investment (FDI) in multi-brand retail after the presidential polls this month.
This could be the first reform measure that the government would take following the change of guard at the finance ministry, sending out a strong positive signal to global investors.
“There is a lot of activity towards this end (opening FDI to retail)… perhaps after the presidential polls, the government could come out with a formal notification of the cabinet decision taken last year,” a senior commerce ministry official said.
The formal notification will pave the way for global players such as Walmart and Carrefour to enter a sector dominated by small stores.
While Trinamul Congress president Mamata Banerjee has been sidelined because of her stand on the presidential polls, the government has found an ally in the Samajwadi Party and hopes to move ahead with its retail reform with the support of the latter.
Commerce minister Anand Sharma, playing the federal card, has been pushing the case for 51 per cent FDI in multi-brand retail.
“We recognise those states who are in favour of it. It is their right, they are democratically elected governments of the provinces. Similarly, there are states who have reservations. Under the Constitution, we have to respect their wishes too,” Sharma said.
The minister’s efforts have helped the government to get the support of the chief ministers of Odisha, Punjab, Uttar Pradesh, Delhi, Maharashtra, Haryana, Andhra Pradesh and Assam.
However, the move is being met with strong opposition from several states, including Bengal, Bihar and Kerala.
Officials said the Centre would be only a facilitator in opening up the sector. States have a larger role to play as they will have to grant permission to the retailers under local laws, such as Shops and Establishments Act and Agricultural Produce Marketing Committee Act.
Last year, the cabinet allowed up to 51 per cent FDI in multi-brand retail with riders. But the notification was suspended following widespread opposition to the move by political parties, including the government’s own allies such as the Trinamul Congress.
One of the conditions proposed by the cabinet was that retailers should open stores in cities with a population of one million and above. According to Census 2011, only 53 of the 8,000 cities in the country meet this criteria, and political opposition narrows down that option to almost half.
Further, the minimum investment is $100 million with at least 50 per cent in back-end infrastructure such as cold storage, soil testing labs and seed farming.
Global retail players are keen to enter the sector and have been lobbying the government to implement the cabinet decision.
Nearly 35-40 per cent of fruits and vegetables and about 10 per cent of foodgrains are wasted in India. Lack of poor farm infrastructure translates into high prices.
The government said the farmer got one-third of the total price paid by consumers against two-thirds in the modern retail format.
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