New Delhi, June 13: The Narendra Modi-government is likely to green light Amazon's $500-million investment in food retail, a major reform drive not only in foreign direct investment but also in improving the food supply chain that will benefit farmers.
"There was some delay due to the abolition of the FIPB. It (Amazon's proposal) will soon be cleared," Union food processing minister Harsimrat Kaur Badal said here today.
With the abolition of the Foreign Investment Promotion Board (FIPB), Amazon's proposal will now be vetted by the Department of Industrial Policy and Promotion (DIPP) under the commerce ministry.
The government has received investment proposals from three companies - Amazon, Grofers and Big Basket - worth $695 million for the retail of food products. US-based retail giant Amazon is one of the major e-commerce players in the country, while Grofers and Big Basket sell grocery online. Amazon has proposed to invest around $500 million.
Last year in June, the government allowed 100 per cent FDI in multi-brand food retail, including through e-commerce. However, the food products have to be produced, processed or manufactured in the country.
The move has drawn little interest from international retail players so far who have complained that just having "food only" stores was not a viable option.
Farmers, however, will benefit from the opening up of food retail. The government expects the organised retailers to source directly from the farmers, thereby eliminating the middlemen who eat into their earnings and often control market prices.
Foreign investors are willing to take a dive but they want a bigger play not only in food but also in soaps and shampoos to make their business viable. The government is yet to accept their demand.
The ministry of food processing, however, favours a leeway by allowing the retailers to sell non-food items to the tune of 25 per cent of all shelf products.
FDI inflows help to bring in new technology, products, processes and markets; foreign investments in backward and farm-gate infrastructure in the supply chain would benefit farmers and processors and create employment.
Badal said India was the world's largest producer of vegetables and fruits, but just 10 per cent of the crop was processed.
Of the Rs 30 lakh crore retail pie in India, food constitutes Rs 4 lakh crore. In 2016-17 (April-December), the food processing sector in the country received more than $650 million in FDI.