18.10.13

ED gives clean chit to WalMart

The Enforcement Directorate has given a clean chit to Walmart, the world’s largest supermarket chain, in a case related to alleged violation of Foreign Exchange Management Act (Fema), a move that may pave the way for the US retailer to pursue its India investment plans more aggressively.
Earlier this week, ED wrote to the RBI, saying a case of violation could not be made out as the government has allowed FDI in multibrand retail and also made provision for retrospective regularization of investments.
At worst, the company can be penalized for not converting its debentures of $100 million (around Rs 450 crore based on 2010 exchange rates) into equity. This will attract a maximum penalty of Rs 50 crore, said sources
The ED investigation was launched after CPI’s Rajya Sabha member M P Achuthan wrote to PM Manmohan Singh, accusing Walmart of violating rules when it invested $100 million in 2010 in a Bharti subsidiary, Cedar Support Services, which in turn allegedly diverted it to retail chain easyday. The issue was flagged as there was no policy of FDI in retail at that time. The RBI took up the matter and asked ED to investigate.
Earlier this month, Walmart ended its partnership with the Bharti Group and will buy its Indian partner’s stake in a wholesale cash-and-carry venture, which sells to hotels, restaurants and kirana stores. In addition, the debentures in Cedar Support Services, the company under investigation, will also be redeemed. 

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