FDI sourcing norms being eased; DIPP circulates new draft

The Department of Industrial Policy and Promotion (DIPP) has circulated a new cabinet note relaxing some clauses of the policy on foreign direct investment in multi-brand retail, after Walmart and other retailers rejected some of the clauses of the policy, including the requirement of 30 per cent local sourcing.

The draft cabinet note seeks views of different ministries on further easing FDI norms in multi-brand segment so as to accommodate some of the demands of global retailers such as Walmart and Tesco.

Walmart, the world's largest retailer, has rejected the requirement of 30 per cent local sourcing from small industries as it depends on cheap sources the world over for product sourcing.

However, Walmart is reported to have later relaxed its stand, agreeing to source a maximum 20 per cent from local small producers.

Amidst a row over Walmart going beyond its brief in its wholesale sector joint venture with the Bharti Group, representatives of the company had met DIPP officials last week to inform government officials about the company's stand on the contentious sourcing issue.

Besides the relaxation in local sourcing, the new draft is reported to have sought views on:

• Capping the minimum investment in back-end infrastructure to $50 million;
• Allowing global retailers to open stores in cities with population less than a million; and
• Allowing FIIs in the sector and removing ambiguity regarding sourcing from SMEs after a unit crosses the $1 million investment mark.

The DIPP has sought a quick response from all concerned ministries, including finance, consumer affairs and MSME, the sources said.

The government allows 51 per cent FDI in multi-brand retail and the policy was formalised nearly nine months back.

However, DIPP has not yet received any formal investment proposals from foreign retailers who are still in the process of lobbying the government for more concessions.