New Delhi, Nov 25 Commerce Minister Anand Sharma Friday formally announced the decision taken by India’s federal cabinet the previous evening to allow up to 51 percent foreign equity in multi-brand retailing and 100 percent in single-brand format.
Addressing a press conference here, the minister said the decision was taken after a year-long debate and consultations with all stakeholders in the most transparent and democratic manner.
“The minimum investment in multi-brand retail will be $100 million. This is minimum and not the maximum. Fifty percent will be in developing rural infrastructure,” Sharma said. “Thirty percent of sourcing will be from small and medium enterprises.”
Also the mega stores will only be allowed in cities with a population of over one million, the minister added.
Incidentally, the press conference was held soon after both houses of parliament were adjourned for the day after opposition parties, led by the Bharatiya Janata Party and the Left Front, disrupted proceedings protesting the cabinet decision on FDI in retail trade.
Sharma defended the government’s decision and said foreign retail chains would bring in much needed investment to build an efficient supply chain and back-end infrastructure like cold storage facilities which the country lacked currently and which resulted in 40-50 percent of perishables getting wasted.
India produces about 195 million tonnes of vegetables alone.
The minister also added that mega retail chains will procure products directly from farmers, giving them better remuneration for their produce as the number of intermediaries would come down drastically.
“Half of what the farmers produce is lost and it never reaches the markets. In addition, the farmer gets less than one-third of the price of food grain than what the consumer pays in the retail outlets. In case of fruits and vegetables, farmer gets 12-15 percent of the price realisation,” Sharma said.
“There is a long chain of intermediaries, but no value chain. We have limited storage capacity, 80 percent of cold storages is taken only to store potatoes,” he added.
However, the government will have the first right of procurement of farm produce — a caveat which will help build buffer stocks of essential items.
The minister referred to other emerging markets like China, Indonesia, Thailand, Malaysia, Russia, South Africa and Brazil, which have allowed foreign investment into multi-branded retail and benefited from the measure.