DIPP may seek clarity from cabinet on FII in multibrand retail

NEW DELHI: Seeking clarity on FDI policy in multi-brand retail over allowing FIIs in the sector and a cap on the minimum investment in back-end infrastructure, DIPP is likely to approach the Cabinet soon.

According to sources, the Department of Industrial Policy and Promotion (DIPP) is also keen on removing the ambiguity regarding sourcing from SMEs after the three-year period when such a unit crossed the USD 1 million investment mark.

"The DIPP needs to go to Cabinet on these three issues. First one is whether the approval for 51 per cent FDI in the sector will include FII? This needs to be clarified from the Cabinet," a source said.

The second issue, the source said, is on the minimum 50 per cent investment in the back-end infrastructure.

"If a global retailer plans an investment of USD 1,000 million, then will it be mandatory for it to invest USD 500 million in the back-end infrastructure as per the current norm? Or will there be some cap, under which the minimum back-end infrastructure investment can be lesser," the source added.

As per the current policy, foreign retailers planning to enter the multi-brand segment would have to invest a minimum of USD 100 million, with 50 per cent of it in the back-end infrastructure.

Also, the retailer must source 30 per cent of the items that it sells in India from 'small industries' which have a total investment in plant and machinery not exceeding USD 1 million.

DIPP is also expected to seek a clarity on the matter from the Cabinet.

"After three years, if an SME is graduated from the definition of USD 1 million investment, then will the global retailer will be allowed to source from the same unit," they added.

Although the government has permitted 51 per cent FDI in multi-brand retail about nine months back, no formal proposal has been received by the DIPP yet.