Multi-brand MNC outlets at airports under watch

NEW DELHI: The plans of multinationals like the Nuance Group, the DFS Group, Alpha Airports Group, Dufry Group and Gebr Heinemann to set up retail facilities at the new international airport being built near Bangalore has led to apprehensions over backdoor entry of foreign direct investment (FDI) in retail. According to the current FDI policy, foreign retailers cannot set up retail outlets unless they deal only with a single-brand. Considering the political opposition to FDI in retail, officials are watching the retail situation at Bangalore airport with concern.

Even in case of single brand retail, FDI is allowed only after clearance by the Foreign Investment Promotion Board (FIPB). Joint ventures with Indian partners are also subject to this stipulation.

While entry of foreign players in duty-free business is accepted, any bid to enter domestic retail is set to face opposition. According to government officials, the retail chains vying to set up shops in Bangalore International Airport (BIAL) have not even applied for formal approval to the Department of Industrial Policy and Promotion (DIPP) in commerce & industry ministry. However, BIAL has already shortlisted Nuance Group, DFS, Dufry International, Alpha Airports and Gebr Heinemann, among others, to set up retail outlets at Bangalore.

When contacted by ET, BIAL refused to comment on the issue. “At this point in time when we are in the shortlist phase for these tenders, we cannot comment on these issues as these would influence the bidders,” BIAL said in response to an e-mailed questionnaire.

BIAL has shortlisted five sets of potential bidders. The packages, for which bidders are being shortlisted, include food retail and retail facilities at the city side of the airport. In order to meet FDI restrictions, officials feel, foreign companies seeking to provide food and city side retail at BIAL may have to go through franchisee route. Domestic majors like Shoppers’ Stop, Pantaloon and Oberoi Group are also in the fray to run retail services at the airport. Interestingly, the Nuance-Shoppers stop combine is being considered as the favourite to win all categories of retail at BIAL since the Nuance Group and Zurich Airports are quite familiar with each other.

Zurich Airports is the airport operator of the Siemens-L&T consortium which runs BIAL.The Left parties are opposed to FDI even in the single brand category. The BJP is also opposed to retail FDI since traders are among its key supporters.

BIAL is being watched by the industry with interest since it is the first greenfield airport in the country to roll out bids for retail services. The BIAL model is likely to set the trend for the new international airport near Hyderabad as well as upgradation of Delhi and Mumbai airports with private participation.