Sharma promises retail giants more clarity in FDI rules

There should soon be more clarity about rules on foreign direct investment (FDI) in multi-brand retail, according to India's commerce and industries minister Anand Sharma.

Sharma has assured a group of companies seeking more foreign presence in retail that the government will provide further clarifications on the investment policy in the sector, as it seeks to attract foreign investment even as its policies remain hazy and almost arbitrary.

This followed a meeting on Thursday with the representatives of several major retail chains, including Wal-Mart Stores Inc, Tesco Plc, Carrefour SA, India's Bharti Enterprises, the Aditya Birla Group, the Tata Group, Reliance Industries Ltd and Pantaloon.

''The objective of the policy is to encourage investments and job creation, benefit farmers and benefit consumers,'' Sharma told newspersons after the meeting.

''We have sufficient space to address those concerns, bring in the clarity, and an early and appropriate view will be taken so that the guidelines can accordingly be given out.''

Sharma didn't say when the clarifications will be made.

In a long-anticipated conference, the retail majors told Sharma that sourcing rules for multi-brand retail must be made similar to those for single-brand retail. They also demanded that foreign firms be allowed to put only 50 per cent of first tranche of investment in back-end infrastructure.

Retailers and lobby groups such as the Federation of Indian Chambers of Commerce and Industry (FICCI) have been raising concerns over the definition of small and medium enterprises (SMEs); and also seeking clarity on investments in 'greenfield' assets, particularly with reference to clauses that restrict foreign retailers from acquiring supply chains and back-end assets from an existing Indian entity.

The current policy requires that multi-brand retailers must source 30 per cent of the goods they sell from SMEs.

''We have asked for clarifications in what defines a small and medium enterprise,'' said Rajan Mittal, vice chairman and managing director of Bharti Enterprises, which manages a joint venture in the wholesale cash and carry trade with Wal-Mart.

The industry insists that the 30 per cent domestic sourcing norm be made voluntary and not mandatory. They also sought clarifications on whether investments in back-end infrastructure would need to be 50 per cent.

Sharma in turn reportedly promised that more flexibility would be provided to foreign retailers.