'Allow 49 pc FDI in multi-brand retail, but with riders' | business | Hindustan Times
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'Allow 49 pc FDI in multi-brand retail, but with riders'

The Consumer Affairs Ministry has recommended allowing FDI in multi-brand retail to the Commerce Ministry, but with the rider that a model law should first be put in place at the state-level to protect small businesses.

business Updated: Aug 22, 2010 12:54 IST

The Consumer Affairs Ministry has recommended allowing FDI in multi-brand retail to the Commerce Ministry, but with the rider that a model law should first be put in place at the state-level to protect small businesses.

"Multi-brand retail should be permitted with a cap of 49 per cent," the ministry has suggested to the Commerce Ministry.

However, if FDI is allowed in multi-brand retail, a major chunk of the investment should be spent on back-end infrastructure, besides logistics and agro-processing, it said.

The Department of Industrial Policy and Promotion (DIPP), under the aegis of the Commerce Ministry, has floated a consultation paper seeking various stakeholders' views on whether to allow FDI in multi-brand retail.

Currently, Foreign Direct Investment (FDI) in multi-brand retail is prohibited in India. FDI up to 51 per cent has been permitted in single-brand retail since 2006.

The Consumer Affairs Ministry, however, stressed that since retail business is a state subject, there should be a model law, for instance a Shopping Mall Regulation Act, to protect the interest of small retailers.

"Setting up of model law in line with the Agriculture Produce Marketing Committee (APMC) Act is a very important suggestion that we have put forth, as it is necessary to protect small retailers," a senior ministry official said.

The APMC Act in each state of India requires for all agricultural products to be sold only in government-regulated markets.

The ministry further said that small retailers should be encouraged to become franchises of multi-brand retailers so that they have access to the logistics/supply chain set up by FDI-funded retailers.

Also, it has agreed to the DIPP's suggestion that the government should collect a certain amount of levy from private traders in case buffer stocks of foodgrains fall below a certain level.

Other regulations like the Essential Commodities Act should be applicable to multi-brand retail also, a senior official said, adding that the DIPP should consult with the state governments before allowing FDI in the multi-brand retail business.