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Govt to revamp FDI policy, may allow multi-brand retail

The government is exploring the option of opening up the retail sector with an emphasis on allowing multi-brand product retail, report Deepak Joshi and Gaurav Choudhury.

india Updated: Feb 02, 2007 20:01 IST

The government is exploring the option of opening up the retail sector with an emphasis on allowing multi-brand product retail. The move attains importance in view of the domestic industry entering the retail business in a big way over the past few months in alliance with global majors in the sector.

The exercise to open up retail is a part of the exercise to take a fresh look at the foreign direct investment (FDI) regime in the country. With FDI expected to cross $12 billion this financial year, the imperative to re-define parameters is being felt in the government, Commerce and Industry Ministry officials told the Hindustan Times.

The issues that are likely to attract the attention of policymakers include liberalisation of regulations relating to cargo handling at airports, permitting FDI in commodities exchange and simplification of procedures as well as relaxation of guidelines on foreign investment in the retailing of petroleum products.

Apart from Reliance Industries Ltd entering the retail business in a big way, Bharti group has also tied-up with Wal-Mart to play a significant role in this growing sector. Many other Indian business group have been in close consultation with overseas players such as Carrefour and Tesco to grab the opportunity that organised retail business offers in India.

Industry secretary Ajay Dua told reporters on Friday, "The information we have got is that they (Carrefour) are talking to various companies to look for a partner but they are yet to finalise its name."

There are indications that the government will also liberalise FDI in asset reconstruction companies, where the current equity limit for FDI stands at 49 per cent through Foreign Investment Promotion Board (FIPB) approval. In the petroleum sector, the dilution of a condition that 26 per cent of the equity must be divested in favour of Indian entities in five years could be a part of the simplification process.

Speaking at a retail summit organised by The Associated Chambers of Commerce and Industry (Assocham), Dua also said that the government was examining a complaint filed by Nusli Wadia-controlled Britannia against French foods firm Danone for its alleged violation of Foreign Investment Regulation Rules to enhance Danone's stake in Britannia.

"We have received a letter from Nusli Wadia, alleging that Danone violated stipulation of Press Note 1 of 2005 on foreign investment and foreign exchange regulations which are being examined with all seriousness", said Dua.

Brittannia has alleged that the investment made by Danone in Bangalore-based biotech firm Avesthagen violates the norms as laid down in Press note 1, which says that a foreign investor must have special government approval to start a JV where the foreign investor has an existing joint venture in the same field.

The government after carefully going through the allegations laid against French company by Wadia would investigate the matter and take necessary action, Dua said.

D Raja, Secretary, Communist Party of India, who was also present on the occasion, said, "Left parties have already warned the government that retailer MNCs like Wal-Mart should not be permitted to enter India even through the joint venture route."

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First Published: Feb 02, 2007 20:01 IST