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India has permitted FDI in retail - conditions
Our Bureau
Date of posting: 28-09-12
      The Government has notified the cabinet/CCEA decisions on FDI in single brand retail, multi brand retail, civil aviation, broadcasting sector and power exchanges. The decisions were taken in the Cabinet and CCEA meetings on September 14, 2012.

      According to the Press Note No.5 (2012 Series), the Government of India has reviewed the extant policy on FDI and decided to permit FDI, up to 51%, under the Government route, in Multi-Brand Retail Trading, subject to specified conditions.

      One of the strong conditions says that the minimum amount to be brought in as FDI by the foreign investor would be USD 100 million.

      Also, at least 50% of total FDI brought in shall be invested in 'backend infrastructure' within three years of the first tranche of FDI, where 'back-end infrastructure' will include capital expenditure on all activities, excluding that on front-end units; for instance, back-end infrastructure will include investment made towards processing, manufacturing, distribution, design improvement, quality control, packaging, logistics, storage, ware-house, agriculture market produce infrastructure etc. Expenditure on land cost and rentals, if any, will not be counted for purposes of back end infrastructure.

      Another conditions says that at least 30% of the value of procurement of manufactured! processed products purchased shall be sourced from Indian 'small industries' which have a total investment in plant & machinery not exceeding USD 1 million. This valuation refers to the value at the time of installation, without providing for depreciation. Further, if at any point in time, this valuation is exceeded, the industry shall not qualify as a 'small industry' for this purpose.

      Also, another strong condition defines that the retail sales outlets may be set up only in cities with a population of more than 10 lakh as per 2011 Census and may also cover an area of 10 kms around the municipal/urban agglomeration limits of such cities; retail locations will be restricted to conforming areas as per the Master/Zonal Plans of the concerned cities and provision will be made for requisite facilities such as transport connectivity and parking.

      Applications would be processed in the Department of Industrial Policy & Promotion, to determine whether the proposed investment satisfies the notified guidelines, before being considered by the FIPB for Government approval.

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