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The Executive Council decided today (June 27) that a mandatory requirement for and lactation rooms be imposed in the sale conditions of government Brand Hong Kong comprising office premises and/or retail outlets, eating places, etc. To meet public demand for more supportive measures for. Multi-brand retailers are against the Government proposal that mandates them to invest 50 per cent of every $million investment in. Sharma had a meeting with top MNC retailers on June 27 to clear the in multi- brand retail was an important step for the Government of India.
The Government has therefore been liberalizing its FDI policy in retail trading in a phased manner as reflected in the diagram below: Simply put, multi brand retail trading implies the sale of multiple brands under one roof to retail customers for personal consumption. The proposal of allowing FDI in multi brand retail was then approved by the Cabinet in November However, due to adverse political backlash, the proposal was kept on hold.
The press release of the government lists out the following conditions with respect to FDI in this sector: A national legislation to govern retail sector, consequently, needs the approval of the States under the Constitution. Accordingly, it would be the prerogative of the State Governments to decide whether and where a multi-brand retailer, with FDI, is permitted to establish its sales outlets within the State.
Additionally, the companies engaged in multi brand retail trading will also have to comply with local zoning regulations, warehousing requirements, access, traffic, parking and other logistics as prescribed by State Governments from time to time. With this restriction, each investor will have to comply with policy on FDI at both Centre and State levels.
Depending on State policy on multi brand retail trade, the investors may or may not be permitted to invest in those States. Interestingly this seems to be the first time that discretion on whether to permit FDI in a sector or not has been left to the States. It speaks volumes of the growth in power of the States in India.
As per Census only 53 cities qualify for FDI in multi-brand retail locations. The above restriction of establishment of retail sales outlets in cities with a minimum prescribed population would limit reach of foreign investor. The foreign investor has to bring in a minimum investment of USD million in an entity engaged in multi brand retail trading. Retail sector being a capital intensive sector, the requirement for minimum capitalisation appears logical. This will attract serious investors and allow the government to study the benefit such investment will have on the Indian economy.
Investment in 'back-end infrastructure' will include capital expenditure on all activities such as investment made towards processing, manufacturing, distribution, design improvement, quality control, packaging, logistics, storage, warehouse, agriculture market produce infrastructure etc.
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Expenditure incurred on front-end units, land cost and rentals will not be reckoned for purposes of backend investment. The Indian retail sector is fraught with lack of adequate infrastructure and increased cost and wastage due to disrupted supply chains and middlemen.
To address this problem, the requirement for investment in back end infrastructure within a three year timeframe has been introduced. Compliance with this condition will have to be self-certified by the company and then cross-checked by statutory auditors. In case of single brand product trading, this condition was seen as a big hurdle. While the condition has been modified in case of single brand product retail trading, anomalies still remain see discussion below on amendment to this condition and its implication.
The mandatory local sourcing requirement in case of multi brand retail trade is aimed to provide a boost to small industries. It may be easier for Multi Brand product retailers to meet this condition since they have a large spectrum of goods to offer. In this regard, we understand that certain foreign investors had raised concerns with respect to compliance with these conditions.
Once again this condition was seen to be restrictive as it ignored the IP holding structures prevalent globally. The onus for ensuring compliance with this condition shall rest with the Indian entity carrying out single-brand product retail trading in India. The dilution of the above condition is in line with international best practices and IP holding structures.
Walmart India CEO Raj Jain quits, Ramnik Narsey to be interim head
It should provide the right fillip to investment in this sector. This condition will have to be complied by the company incorporated in India carrying out single-brand product retail trading and recipient of FDI. The fine print of the above modification by way of circular is yet to be notified, therefore, it needs to be seen to what extent the requirement has been technically modified.
It is important to note the term MSME has not been defined. Further, the press release also underlines the foreign retail traders finding it difficult to meet local sourcing requirements would have to build production capabilities either in existing or new units so as to cater to their requirements in terms of design, production, quality etc.
Walmart India CEO Raj Jain quits, Ramnik Narsey to be interim head - Business News
Until now, foreign airlines were allowed to participate in the equity of companies operating cargo airlines, helicopter and seaplane services, but not in the equity of an air transport undertaking operating scheduled and non-scheduled air transport services. The Cabinet has now permitted foreign airlines to invest, under the approval route, in the capital of Indian companies operating scheduled and non-scheduled air transport services, up to the limit of 49 percent of their paid up capital.
Taking his place as the interim head of India business would be Ramnik Narsey, a Woolworths India veteran who joined Walmart in May from the supermarket chain.
To add to the rather unceremonious manner of leadership change was Jain's absence at the townhall meeting when the announcement was made. The company's Indian arm, which successfully set up a wholesale cash and carry business in India, where foreign investment was allowed sincehas of late, been mired in controversy. In February this year, following an uproar in Parliament, the Indian government also set up a one-man enquiry committee - retired Punjab and Haryana High Court Chief Justice Mukul Mudgal - to investigate if the company has, indeed, made lobbying-related payments in India.
Although Justice Mudgal has submitted the report, the government is yet to make it public. Retail FDI, a damp squib Experts are of the view that Jain's exit has to do with the ambiguities surrounding the Indian modern retail sector, as much as the allegations of paying off Indian authorities. Despite India opening up its retail sector to foreign direct investment in Septembernot a single multinational retailer has announced an entry to multi-brand retail.
However, there is no clarity on what the "back-end" would be, as it could mean different things to different retailers. Also, they have to mandatorily source a minimum 30 per cent of merchandise from domestic micro, small and medium enterprises.
Other drawbacks are that e-commerce, a fast-growing segment, has been left out of the ambit of FDI and states will have the freedom to approve or disapprove retail investments. What if the company does not find it essential to invest 50 per cent in back-end infrastructure?
Or why should they spend Rs 50 crore where Rs 40 crore would suffice? There is also concern that a change in government at the Centre in can potentially reverse the FDI decision and put investments in peril, with the BJP opposing FDI in multi-brand retail tooth and nail.
But Anand Sharma, union Commerce Minister, had allayed the fears, saying that the decision has already been passed by the government. They must be held accountable," he told a television channel, exhorting retailers to make their entry soon. We put the survival of the government at risk.
Now you must come and respect the step," he said.