Government notifies norms for FDI in retail

The Centre has issued guidelines for FDI in retail that permit multinational cos to offer multiple products under a single brand.

india Updated: Feb 14, 2006 15:55 IST

The Centre has issued guidelines for Foreign Direct Investment in retail that permit multinational companies to offer multiple products under a single brand with prior government approval.

The government has also issued notification liberalising FDI regulations in various other sectors through the automatic route.

The notification pertaining to retail sector states that FDI up to 51 per cent in retail trade of single brand products would cover only those that are sold under the same brand internationally and are branded during manufacturing.

The guidelines said that the application for retail FDI would specifically indicate "the product or product categories which are proposed to be sold under a single brand."

"Any addition to the product or product categories to be sold under single brand would require a fresh approval of the Government," the Department of Industrial Policy and Promotion said in the notification.

The notification, through Press Note 3 of 2006, which comes into effect immediately, says that FDI in retail would be allowed only with prior government approval.

A company would have to file an application to the Secretariat of Industrial Assistance under the Department of Industrial Policy and Promotion. The application would later be considered by the Foreign Investment Promotion Board.

The move is "aimed at attracting investments in production and marketing, improving availability of such goods for the consumer, encouraging increased sourcing of goods from India, and enhancing competitiveness of Indian enterprises through access to global designs, technologies and management practices," it said.

The sectors include greenfield airports, distillation and brewing of potable alcohol, manufacture of industrial explosives and hazardous chemicals, laying of natural gas/LNG pipelines and cash-and-carry wholesale trading.

The DIPP issued Press Note 4 of 2006 series that permits 100 per cent FDI in existing airports with prior permission from FIPB and subject to sectoral regulations notified by the Ministry of Civil Aviation.

Similarly, 100 per cent FDI in manufacture of alcohol under the automatic route is allowed subject to licensing from state governments where the unit will be set up.

The Government permitted 100 per cent FDI in cigarettes and cigar manufacturing through the FIPB route.

FDI up to 100 per cent has been permitted in coal and lignite mining for captive use in all sectors, in power trading and processing and warehousing of coffee and rubber.

Companies setting up infrastructure relating to marketing of petroleum and natural gas and undertaking mining of diamond and precious stones will be able also to invest 100 per cent through the automatic route.

The government has also removed the mandatory requirement of disinvestment of 26 per cent foreign equity in favour of resident Indian shareholders within five years for companies engaged in B2B e-commerce.

The press note also extended the ambit of the automatic route to transfer of shares from residents to non-residents in financial services and where SEBI regulations are attracted and in all cases where approvals are required from RBI/SEBI or insurance regulator IRDA.

First Published: Feb 14, 2006 15:55 IST