The MSME ministry has proposed allowing only up to 18 per cent FDI in multi-brand retail, while cautioning that entry of global retailers could harm interests of kirana stores, small farmers and consumers.
In its reply to the comments sought by the Department of Industrial Policy and Promotion (DIPP), the Micro, Small and Medium Enterprises (MSME) ministry has said even if FDI in multi-brand retail has to be allowed, it should be less than 18 per cent, official sources said. “India should tread cautiously by opening the sector, if at all, gradual and analysing the impact before opening it more.
In its reply to the comments sought by the Department of Industrial Policy and Promotion (DIPP), the Micro, Small and Medium Enterprises (MSME) ministry has said even if FDI in multi-brand retail has to be allowed, it should be less than 18 per cent, official sources said. “India should tread cautiously by opening the sector, if at all, gradual and analysing the impact before opening it more.
In the beginning FDI less than 18 per cent may be thought of,” the ministry’’s reply to comments sought by DIPP said. In July DIPP had sought comments from various stakeholders on opening of FDI in multi-brand retail. Currently FDI in multi-brand retail is prohibited in India, while in 51 per cent is allowed in mono-brand retail and 100 per cent in cash and carry.
“It may harm the interest of small farmers as well as consumers , who would be at the mercy these global retailers, who will be able to influence prices,” it said. MSME’’s reply further said: “Once multi-brand retail FDI is allowed, close competition of kirana stores among each other will go. The multi-brand retailer will take over the market as per its will because there cannot be as many retail outlets in each locality as the present kirana stores.” “Thus in practical terms competition will go and monopoly will be established.” The ministry suggested that even if FDI is allowed, conditions should be put that “50 per cent of the investment should be in fixed capital, including facilities for supply chain infrastructure, processing and storage.”
“It may harm the interest of small farmers as well as consumers , who would be at the mercy these global retailers, who will be able to influence prices,” it said. MSME’’s reply further said: “Once multi-brand retail FDI is allowed, close competition of kirana stores among each other will go. The multi-brand retailer will take over the market as per its will because there cannot be as many retail outlets in each locality as the present kirana stores.” “Thus in practical terms competition will go and monopoly will be established.” The ministry suggested that even if FDI is allowed, conditions should be put that “50 per cent of the investment should be in fixed capital, including facilities for supply chain infrastructure, processing and storage.”
It also said that malls housing multi-brand retail stores should be “at least two kilometers outside the precincts of the town or city area” to minimise competition to small retailers. FDI-backed multi-brand retailers should be allowed to open stores initially only in six metros — Delhi, Mumbai, Kolkata, Chennai, Bangalore and Hyderabad, it added. “If allowed in cities or town having lesser population, the impact of these multi-brand retail stores will be felt faster and deeper because of lesser number of local retail stores,” it said.
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