The government on Thursday approved the much-awaited relaxation of the foreign direct investment (FDI) policy on multi-brand retail trading (MBRT), by easing the three main contentious riders on such money. These three, added as conditions to last year’s decision to open FDI in this segment, were on a mandatory 30 per cent sourcing from small domestic industries, 50 per cent of the investment to be in back-end infrastructure and outlets to be opened only in cities with population of more than a million. On the 30 per cent sourcing, the government on Thursday expanded the definition of micro, small and medium enterprises (MSME), to include companies with a total investment of up to $2 million in plant and machinery will also be eligible for such sourcing of ‘manufactured and processed’ products. Further, even if such firms cross the $2-million threshold at a later stage, this will be ignored as long as the retailer keeps sourcing from that particular firm. “The ‘small industry’ status would be reckoned only at the time of first engagement with the retailer”. According to Commerce Minister Anand Sharma, “further review was felt necessary for modification” of the FDI policy. Sharma, who briefed the media after the Cabinet meeting, also said “more clarity was required” for the benefit of retailers. Relaxation of the sourcing norm would not only help arrest loss of business for such Indian small industries that outgrew the eligibility but would also help retailers develop a robust supply chain, official sources said. Finally, retailers are to now be allowed to open stores in all states that have agreed to implement FDI in multibrand retail, even if such states do not have cities of more than a million population. States will now have a choice of city for the location of the retail stores. Sharma said there were 53 cities having more than a million people each, while 12 states have so far have allowed FDI policy in MBRT.
Posted on: Thu, 01 Aug 2013 23:12:53 +0000
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