FDI- Review of the policy on Foreign Direct Investment- allowing FDI in Multi-Brand Retail Trading.

Government of India
Ministry of Commerce & Industry
Department of Industrial Policy & Promotion
(FC-I Section)
Press Note No.5 (2012 Series)

Subject: Review of the policy on Foreign Direct Investment- allowing FDI in Multi-Brand Retail Trading.

1.0 Present Position:

Foreign Direct Investment (FDI) is prohibited in retail trading, except in single-brand product retail trading, in which FDI, up to 100%, is permitted, under the Government route, subject to specified conditions.

2.0 Revised Position:

The Government of India has reviewed the extant policy on FDI and decided to permit FDI, up to 51%, under the Government route, in Multi-Brand Retail Trading, subject to specified conditions.

3.0 Accordingly, the following amendment is made in ‘Circular 1of 2012- Consolidated FDI Policy’, issued on 10.04.2012, by the Department ofIndustrial Policy & Promotion:

3.1 Paragraph 6.1 – ‘Prohibited Sectors’, is substituted with the following:

“6.1 PROHIBITED SECTORS:
FDI is prohibited in:
(a) Lottery Business, including Government /private lottery, online lotteries, etc.
(b) Gambling and Betting, including casinos etc.
(c) Chit funds
(d) Nidhi company
(e) Trading in Transferable Development Rights (TDRs)
(f) Real Estate Business or Construction of Farm Houses
(g) Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes
(h) Activities / sectors not open to private sector investment e.g. Atomic Energy and Railway Transport (other than Mass Rapid Transport Systems).

Foreign technology collaboration in any form, including licensing for franchise, trademark, brand name, management contract, is also prohibited for Lottery Business and Gambling and Betting activities.”

3.2 A new paragraph as paragraph 6.2.16.5 is inserted below paragraph 6.2.16.4 as below:

6.2.16.5 Multi Brand Retail Trading 51% Government
 

 (l) FDI in multi brand retail trading, in all products, will be permitted,

subject to the following conditions:

(i) Fresh agricultural produce, including fruits, vegetables, flowers,

grains, pulses, fresh poultry, fishery and meat products, may be

unbranded. Minimum amount to be brought in, as FDI, by the foreign investor, would be US $ 100 million.

(iii) At least 50% of total FDI brought in shall be invested in ‘backend

infrastructure’ within three years of the first tranche of FDI, where

‘back-end infrastructure’ will include capital expenditure on all

activities, excluding that on front-end units; for instance, 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. Expenditure on land cost and rentals, if any, will

not be counted for purposes of back end infrastructure.

(iv) At least 30% of the value of procurement of manufactured! processed

products purchased shall be sourced from Indian ‘small industries’

which have a total investment in plant & machinery not exceeding US

$ .1.00 million. This valuation refers to the value at the time of

installation, without providing for depreciation. Further, if at any point

in time, this valuation is exceeded, the industry shall not qualify as a

‘small industry’ for this purpose. This 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.

(v) Self-certification by the company, to ensure compliance of the

conditions at serial nos. (ii), (iii) and (iv) above, which could be crosschecked,

as and when required. Accordingly, the investors shall

maintain accounts, duly certified by statutory auditors.

(vi) Retail sales outlets may be set up only in cities with a population of

more than 10 lakh as per 2011 Census 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; In

States/ Union Territories not having cities with population of more

than 10 lakh as per 2011 Census, retail sales outlets may be set up in

 (vii) Government will have the first right to procurement of agricultural

products.

the cities of their choice, preferably the largest city and may also cover

an area of 10 kms around the municipal/urban agglomeration limits of

such cities. The locations of such outlets 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.

(viii) The above policy is an enabling policy only and the State

GovernmentslUnion Territories would be free to take their own

decisions in regard to implementation of the policy. Therefore, retail

sales outlets may be set up in those StateslUnion Territories which

have agreed, or agree in future, to allow FDI in MBRT under this

policy. The list of StateslUnion Territories which have conveyed their

agreement is annexed. Such agreement, in future, to permit

establishment of retail outlets under this policy, would be conveyed to

the Government of India through the Department of Industrial Policy

& Promotion and additions would be made to the annexed list

accordingly. The establishment of the retail sales outlets will be in

compliance of applicable StatelUnion Territory laws/ regulations, such

as the Shops and Establishments Act etc.

(ix) Retail trading, in any form, by means of e-commerce, would not be

permissible, for companies with FDI, engaged in the activity of multibrand

retail trading.

(x) Applications would be processed in the Department of Industrial Policy

& Promotion, to determine whether the proposed investment satisfies

the notified guidelines, before being considered by the FIPB for

Government approval.

4.0 The above decision will take immediate effect.

Joint Secretary to
D/o IPP File No.: 5/12//201O-FC-I dated: 20th September, 2012

Copy forwarded to:
1. Press Information Officer, Press Information Bureau- for giving wide publicity to the above
Press Note.
2. BE Section in the Department of Industrial Policy and Promotion- for uploading the Press
Note on DIPP’s website.

ANNEXURE
LIST OF STATES/ UNION TERRITORIES AS MENTIONED IN
PARAGRAPH 6.2.16.5(l)(viii)
1. Andhra Pradesh
2. Assam
3. Delhi
4. Haryana
5. Jammu & Kashmir
6. Maharashtra
7. Manipur
8. Rajasthan
9. Uttarakhand
10. Daman & Diu and Dadra and Nagar Haveli (Union Territories)

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