Govt to review FDI policy on wholesale trading

NEW DELHI: The government’s foreign direct investment (FDI) policy on wholesale trading is up for review. While FDI upto 100% is permitted in wholesale trading, ministries are demanding restrictions on FDI inflow to ward off surge in imports.
As of now, there are no sectoral restrictions under wholesale trading policy. The government has, therefore, “asked commerce ministry to separately review the trading policy in the light of divergent sectoral recommendations made by various ministries which are often inconsistent with the existing government policy�.
The matter came into prominence when department of agriculture rejected Malaysia-based Felcra Berhad’s proposal to get into business of bulk imports of RDB palm oil and wholesale trading to institutions in India. The rejection was on ground of excessive palm oil imports flooding the country, thus hampering interests of domestic producers.
The Malaysian company wanted to acquire 75% stake in Felcra Commodities India from the existing promoters Khush Commodities for Rs 3.6 crore. The company also gave an undertaking that it would start crude palm oil refining by 2008 and set up an export hub in Mangalore. This, however, did not cut any ice with the concerned department whose immediate concern was to thwart excessive imports. As a result of such departmental interventions, the implementation of the FDI policy is being hampered, sources said.
Palm oil imports had reached a new high of 87% even as the overall imports of edible oil declined 28% in the first quarter of the current oil year beginning November 2001. Despite Malaysia and Indonesia, both major palm oil producers and exporters, complaining about higher import duty on palm oil, its share in the total edible oil imports in India has continued to grow rapidly.
In 1998-99, the share of palm oil products in overall edible oil import basket was 61%, which increased to 68% in 1999-2000, and now in the first quarter (November 2001 to January 2002) of the current oil year, it has gone up further to a new high of 87%. In this context, industry ministry told agriculture department that if there was a need to impose certain sectoral restrictions, it must be forwarded to DIPP so that it could be placed before group of ministers on FDI. Moreover, any change in policy will be with prospective effect only.