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Review of the policy on foreign direct investment in the Multi-Brand Retail Trading Sector

Government of India

Ministry of Commerce & Industry

Department of Industrial Policy & Promotion

 Press Note No. 5 (2013 Series)

 Subject: Review of the policy on foreign direct investment in the Multi-Brand Retail Trading Sector-amendment of paragraph 6.2.16.5 (iii), (iv) and (vi) of Circular 1 of 2013-Consolidated FDI Policy

1.0     Present Position:

1.1     Paragraphs 6.2.16.5 (iii), (iv) and (vi) of the ˜Circular 1 of 2013-Consolidated FDI Policy™ effective from April 5, 2013, relating to the policy on FDI in Multi-Brand Retail Trading, read as below:

1.2   Paragraph 6.2.16.5 (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 backend infrastructure.

1.3   Paragraph 6.2.16.5 (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.

1.4   Paragraph 6.2.16.5 (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 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.

2.0     Revised Position:

The Government of India has reviewed the position in this regard and decided to amend Paragraph 6.2.16.5 (iii), (iv) and (vi) of Circular I of 2013-Consolidated FDI Policy™, effective from April 5, 2013, as below:

2.1     Amendment to paragraph 6.2.16.5 (iii):

At least 50% of total FDI brought in the first tranche of US $ 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; 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 backend infrastructure. Subsequent investment in the backend infrastructure would be made by the MBRT retailer as needed, depending upon its business requirements.

2.2     Amendment to paragraph 6.2.16.5 (iv):

At least 30% 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 US $ 2.00 million. 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 US$ 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.

2.3 Amendment to paragraph 6.2.16.5 (vi):

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.

3.0 The above decision will take immediate effect.

(Anjali Prasad)

Additional Secretary to the government of India

 dated- 22 August, 2013

Tags: FDIforeign direct investmentFront and back endsGovernment of IndiaIndiaInfrastructureRetailTranche

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