India’s plans to allow foreign direct investment (FDI) in food retail may come with a rider: mandatory investment by overseas companies of at least 15% in local back-end infrastructure such as cold chains.
The food processing ministry feels that a separate clause specifying this would reduce wastage, help diversification and raise income to fit into the government’s target of doubling farm income by 2020.
Food processing minister Harsimrat Kaur Badal told HT that such a clause will give farmers better price realisation and greater job opportunities, apart from reducing wastages.
Inter-ministerial consultations are on for writing the finer policy rules to fully open up the food sector to overseas investors.
The Department of Industrial Policy and Promotion (DIPP), which pilots all FDI policy rules, is examining whether such a clause would be perceived as restrictive by foreign food companies, affecting investment decisions.
Finance minister Arun Jaitley had in his budget speech last month announced the government’s intent to allow 100% FDI in food retail.
Sources told HT that the FDI in multi-brand retail for food products will also likely come bundled with the condition that these items are completely produced in India.
“100% FDI will be allowed through FIPB route in marketing of food products produced and manufactured in India. This will benefit farmers, give impetus to food processing industry and create vast employment opportunities,” Jaitley had said in the budget speech.
Foreign Investment Promotion Board (FIPB) is the nodal authority that vets all proposals from overseas investors.
Allowing 100% FDI in food retail is a major step given the ruling Bharatiya Janata Party‘s persistent opposition to foreign giants setting up stores in India. European mega chain Tesco, which set up a joint venture with the Tata group in 2013, is the only foreign multi-brand retail outfit operating in India currently.