Commerce Ministry seeks opinion on retail FDI policy reversal

NEW DELHI: The Commerce and Industry Ministry has asked the Law Ministry for its opinion on whether the Delhi and Rajasthan governments can reverse decisions to allow foreign retailers to start supermarket chains.

The Department of Industrial Policy and Promotion sent a communication to the Law Ministry last week on whether state governments can opt out of the foreign direct investment policy after first deciding to implement it, sources told PTI.

Rajasthan and Delhi, where the state governments changed after assembly elections in November-December, decided to scrap the policy allowing FDI in multi-brand retailing last month and communicated their decisions to the Centre.

The central government had permitted 51 per cent FDI in multi-brand retailing in September 2012, leaving its implementation to the states.

So far, only UK-based Tesco's proposal to invest in the sector has been approved by the Centre.

Twelve states, mostly Congress-led, had agreed to allow global retailers to open supermarkets. The other states include Maharashtra, Karnataka and Andhra Pradesh.

The Congress lost to the Bharatiya Janata Party (BJP) in Rajasthan and to the Arvind Kejriwal-led Aam Aadmi Party (AAP) in Delhi in the recent assembly elections.

The AAP government withdrew the approval given by the previous Sheila Dikshit dispensation for FDI in multi-brand retail in Delhi on January 13. It said allowing global retail chains such as Wal-Mart and Tesco to set up shop would result in large-scale job losses.

The Rajasthan government followed Delhi's decision to scrap the policy about two weeks later.

Commerce Minister Anand Sharma had described the Delhi government's decision as "abrupt, irresponsible and ill-considered," saying India is not a banana republic where policy decisions can be reversed.

Kejriwal's government resigned on February 14 after suffering a defeat in the assembly on the Jan Lokpal Bill.