The government has sweetened the deal for foreign investment in multi-brand retail stores.
Foreign retailers will now be allowed to open stores in cities that have a population of less than one million. Earlier, supermarkets could only come up in 53 cities. A relaxation was permitted only in case of states that did not have a single city with a population of one million. The move will allow stores to come up in cities such as Gurgaon and Aurangabad.
The cabinet also approved a plan to tighten norms for ‘control’ of firms to ensure foreign players do not overwhelm any joint venture.
With no investor setting shop after the government allowed FDI in multi-brand retail 10 months ago, the government has decided to water down some of the provisions which were seen as obstacles to investment.
Sharma told reporters that retailers can now source goods from medium, small and micro enterprises, where the investment cap will be $2 million (around Rs 12 crore), instead of the earlier ceiling of $1 million to comply with the requirement of sourcing at least 30% goods from small vendors. Further, sourcing can continue even after the $2 million investment cap is breached. “You can’t penalize a small company for being competitive,” Sharma reasoned. As a further relaxation in the rules, the government has said that retailers can buy from farmers’ and agriculture cooperatives, which will be counted in the sourcing requirement. The sourcing norms have to be met over a five-year period.
To address another concern, the government has said that at least 50% of total FDI brought in the first tranche of $100 million will be invested in creating back-end infrastructure within three years.
While Sharma ruled out the possibility of dilution of the policy by another political party, retailers were guarded in their response. “
Foreign retailers will now be allowed to open stores in cities that have a population of less than one million. Earlier, supermarkets could only come up in 53 cities. A relaxation was permitted only in case of states that did not have a single city with a population of one million. The move will allow stores to come up in cities such as Gurgaon and Aurangabad.
The cabinet also approved a plan to tighten norms for ‘control’ of firms to ensure foreign players do not overwhelm any joint venture.
With no investor setting shop after the government allowed FDI in multi-brand retail 10 months ago, the government has decided to water down some of the provisions which were seen as obstacles to investment.
Sharma told reporters that retailers can now source goods from medium, small and micro enterprises, where the investment cap will be $2 million (around Rs 12 crore), instead of the earlier ceiling of $1 million to comply with the requirement of sourcing at least 30% goods from small vendors. Further, sourcing can continue even after the $2 million investment cap is breached. “You can’t penalize a small company for being competitive,” Sharma reasoned. As a further relaxation in the rules, the government has said that retailers can buy from farmers’ and agriculture cooperatives, which will be counted in the sourcing requirement. The sourcing norms have to be met over a five-year period.
To address another concern, the government has said that at least 50% of total FDI brought in the first tranche of $100 million will be invested in creating back-end infrastructure within three years.
While Sharma ruled out the possibility of dilution of the policy by another political party, retailers were guarded in their response. “
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