India may soon open the doors of multi-brand retail to global chains such as Walmart and Carrefour. A Committee of Secretaries is slated to meet next week to finalise the amount of FDI in the sector and set conditions to protect local grocers.
The committee is also likely to lay down stringent norms for back-end infrastructure such as cold storage, soil testing labs and seed farming.
The clearance will be subject to tough riders as there are apprehensions about the impact on local grocers, sources said.
On July 22, the Committee of Secretaries (CoS), headed by cabinet secretary Ajit Kumar Seth, will try to resolve inter-ministerial differences and then prepare a cabinet note for clearance.
Differences persist between the Department of Industrial Policy and Promotion and the Ministry of Consumer Affairs (MCA) over the FDI cap. While the department favours 51 per cent FDI, the MCA is pitching for a ceiling of 49 per cent to ensure that the control resides in the hands of Indians.
At present, the government does not allow FDI in retail, which employs 33 million people and is dominated by local grocers. However, 51 per cent FDI are permitted in single brand retail, and global chains such as Nike and Louis Vuitton have set up shops. There are no restrictions on foreign investments in wholesale cash and carry format business.
Global multi-brand retail chains have been pushing India to open up the sector to FDI. Walmart, Carrefour and Metro have opened cash-and-carry stores to tap the market.
The other difference that the secretaries have to sort out is the quantum of investment that retail chains have to earmark for back-end infrastructure.
Of the $100-million minimum investment proposed, the DIPP feels at least 50 per cent have to be earmarked for back-end infrastructure. However, the consumer affairs ministry wants a larger share of 75 per cent of FDI to be invested in back-end supply chains.
India annually loses more than Rs 1 lakh crore in farm products, including fruits and vegetables, because of a lack of proper infrastructure such as cold chain storage and warehousing