Multi-brand retail norms relaxed
Updated: Aug 02, 2013 02:37:00pm
New Delhi, Aug 2 (KNN) The Union Cabinet yesterday approved the proposal for amendment in the existing FDI policy in multi-brand retail trading (MBRT) in an effort to convince global chains to take the final step and open shop in the country.
Considering that no global brand has set up operations here thus far, 10 months after the government allowed FDI in multi-brand retail, the move is likely to hasten their decision. It is hoped that the changes would effectively address the concerns of investors.
The first amendment has to do with backend infrastructure which is expected to bring more clarity to the policy.
“At least 50 per cent of total FDI brought in the first tranche of USD 100 million, shall be invested in 'backend infrastructure' within three years, where 'back-end infrastructure' will include capital expenditure on all activities, excluding that on front-end units,” an official notification said.
Back-end infrastructure will include investment made towards processing, manufacturing, distribution, design improvement, quality control, packaging, logistics, storage, ware-house, agriculture market produce infrastructure etc.
However, expenditure on land cost and rentals, if any, will not be counted for purposes of backend infrastructure. Subsequent investment in the back-end infrastructure would be made by the MBRT retailer as needed, depending upon his business requirements.
Another amendment relates to sourcing of products.
“At least 30 per cent of the value of procurement of manufactured/ processed products purchased shall be sourced from Indian micro, small and medium industries which have a total investment in plant & machinery not exceeding USD 2.00 million,” it said.
This means that retailers can now source goods from medium, small and micro enterprises, where the investment cap will be USD 2 million, instead of the earlier ceiling of USD 1 million to comply with the requirement of sourcing at least 30 per cent goods from small vendors. Further, sourcing can continue even after the USD 2 million investment cap is breached.
Significantly, this valuation refers to the value at the time of installation, without providing for depreciation. The 'small industry' status would be reckoned only at the time of first engagement with the retailer and such industry shall continue to qualify as a 'small industry' for this purpose even if it outgrows the said investment of USD 2.00 million, during the course of its relationship with the said retailer.
Sourcing from agricultural co-operatives and farmers’ co-operatives would also be considered in this category. The procurement requirement would have to be met, in the first instance, as an average of five years' total value of the manufactured/ processed products purchased, beginning 1st April of the year during which the first tranche of FDI is received. Thereafter, it would have to be met on an annual basis.
Another key amendment is that foreign retailers will now be allowed to open stores in cities that have a population of less than one million. This amendment attempts to bring parity in policy which will be applicable to all states. It also means that global giants can now open shop in places such as Gurgaon and Aurangabad.
“Retail sales outlets may be set up only in cities with a population of more than 10 lakh as per the 2011 Census or any other cities as per the decision of the respective State Governments, and may also cover an area of 10 kms around the municipal/urban agglomeration limits of such cities; retail locations will be restricted to conforming areas as per the Master/Zonal Plans of the concerned cities and provision will be made for requisite facilities such as transport connectivity and parking,” it said. (KNN/ES)
Considering that no global brand has set up operations here thus far, 10 months after the government allowed FDI in multi-brand retail, the move is likely to hasten their decision. It is hoped that the changes would effectively address the concerns of investors.
The first amendment has to do with backend infrastructure which is expected to bring more clarity to the policy.
“At least 50 per cent of total FDI brought in the first tranche of USD 100 million, shall be invested in 'backend infrastructure' within three years, where 'back-end infrastructure' will include capital expenditure on all activities, excluding that on front-end units,” an official notification said.
Back-end infrastructure will include investment made towards processing, manufacturing, distribution, design improvement, quality control, packaging, logistics, storage, ware-house, agriculture market produce infrastructure etc.
However, expenditure on land cost and rentals, if any, will not be counted for purposes of backend infrastructure. Subsequent investment in the back-end infrastructure would be made by the MBRT retailer as needed, depending upon his business requirements.
Another amendment relates to sourcing of products.
“At least 30 per cent of the value of procurement of manufactured/ processed products purchased shall be sourced from Indian micro, small and medium industries which have a total investment in plant & machinery not exceeding USD 2.00 million,” it said.
This means that retailers can now source goods from medium, small and micro enterprises, where the investment cap will be USD 2 million, instead of the earlier ceiling of USD 1 million to comply with the requirement of sourcing at least 30 per cent goods from small vendors. Further, sourcing can continue even after the USD 2 million investment cap is breached.
Significantly, this valuation refers to the value at the time of installation, without providing for depreciation. The 'small industry' status would be reckoned only at the time of first engagement with the retailer and such industry shall continue to qualify as a 'small industry' for this purpose even if it outgrows the said investment of USD 2.00 million, during the course of its relationship with the said retailer.
Sourcing from agricultural co-operatives and farmers’ co-operatives would also be considered in this category. The procurement requirement would have to be met, in the first instance, as an average of five years' total value of the manufactured/ processed products purchased, beginning 1st April of the year during which the first tranche of FDI is received. Thereafter, it would have to be met on an annual basis.
Another key amendment is that foreign retailers will now be allowed to open stores in cities that have a population of less than one million. This amendment attempts to bring parity in policy which will be applicable to all states. It also means that global giants can now open shop in places such as Gurgaon and Aurangabad.
“Retail sales outlets may be set up only in cities with a population of more than 10 lakh as per the 2011 Census or any other cities as per the decision of the respective State Governments, and may also cover an area of 10 kms around the municipal/urban agglomeration limits of such cities; retail locations will be restricted to conforming areas as per the Master/Zonal Plans of the concerned cities and provision will be made for requisite facilities such as transport connectivity and parking,” it said. (KNN/ES)
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