FDI in duty-free outlets rejected

NEW DELHI: The government has decided not to allow foreign direct investment (FDI) in the duty-free business, arguing that it amounts to retailing. The issue was discussed recently in the context of a proposal from Dubai-based Flemingo International to invest in Fleming (DFS) Private Ltd and FIPB's rejection of the proposal. Flemingo International wanted to pick up 80% stake in Fleming DFS, a company registered in India for setting up duty-free outlets in Guwahati, Jaipur, Lucknow, Amritsar and Thiruvananthapuram airports. Based on the Commerce ministry's recommendations, the rejection came despite the fact that the Dubai-based firm has already been selected by the Airport Authority of India (AAI) for setting up five duty-free outlets. The move reiterates the government's emphasis on keeping FDI off retailing despite repeated pleas from the trade, commerce department sources said. The issue is under debate for years now with lobbies working for and against it. When Mr Murasoli Maran, now ailing in the US, was handling the Commerce portfolio, he decided that FDI will not be allowed in retailing and the policy is being followed till now. A number of applications for FDI in retailing have been rejected by FIPB and the commerce department is keen to maintain this policy, the sources added. Flamingo International has informed FIPB that 20% equity in its joint venture would be with resident Indians while it planned to bring in the remaining 80% to launch five duty-free outlets. There was some confusion over the issue since duty-free shops import most of their merchandise and payments against sales are made in foreign currency. The commerce department was, however, clear that the proposal should be rejected since import and sale to individuals amounted to retail trading. The department of industrial policy and promotion (DIPP) also supported the Commerce ministry's argument. It is not clear if the FIPB's rejection would nip Flemingo's entry into duty-free business in India. According to highly-placed sources in the Civil Aviation ministry and AAI, the UAE-based firm was the sole bidder for leasing space for duty-free outlets at most of these airports. The bidder had passed both technical evaluation and the bid price was above the reserve level, they added. As of now, most of the duty-free outlets in the country are run by India Tourism Development Corporation (ITDC). Despite the FIPB's rejection, the Dubai-based company may go ahead with the launch of duty-free outlets if it finds alternate sources of equity funding. Alpha Retail and SUTL, who were also in the fray for obtaining duty-free shops in these airports, decided to opt out of the race since they lost interest in the offer. The other player in the fray, Argentinean Airports, failed to make it to financial bidding since its earnest money deposit did not reach within the deadline. Since ITDC did not bid, Flamingo was left as the lone player in the field seeking space for duty-free outlets at these airports. According to AAI sources, tenders for allocation of space for duty-free outlets at these airports were floated last September.

FDI in duty-free outlets rejected

The government has decided not to allow foreign direct investment (FDI) in the duty-free business, arguing that it amounts to retailing. The issue was discussed recently in the context of a proposal from Dubai-based Flemingo International to inves...

More from our Partners

Popular Categories

Hot on Web

In Case you missed it

Top Searched Companies

Latest News

Download ET APP

Follow us on

become a member