In a bid to open up multi-brand retail to foreign direct investment, the government has initiated discussions on the issue between ministries. Foreign investment in multi-brand retail remains a political minefield given the political clout of the stakeholders and the government therefore feels the need to tread cautiously on the issue.
Acording to a report in The Economic Times, which quoted an unidentified official from the Department of Industrial Policy and Promotion (DIPP), the department has written to the finance ministry on the issue and is also discussing the merits and demerits of the move with the agriculture ministry.
The paper quoted the official as saying that the move to open up the retail sector was part of the government's strategy to plug gaps in the existing food supply chain and more importantly narrow the difference between the farmgate prices and retail prices.
The department would soon circulate a discussion paper to seek a consensus on the issue, according to the report. Foreign direct investment in India is allowed only in cash-and-carry or wholesale ventures, but not in multi-brand retail, due to opposition from millions of small shopkeepers who form valuable vote banks during elections.
Foreign retailers can enter the retail sector only through franchise agreements with local players, an arrangement under which they can own up to 51 per cent in single-brand retail, while 100 per cent ownership is allowed in cash-and-carry ventures.
The report goes no to add that to address the concerns of critics of foreign investment in retail, the government is likely to insist on control remaining in Indian hands.