Retailers against investment clause

Multi-brand retailers are against the government proposal that mandates them to invest

50 percent of every 100 million dollars (Rs 596.8 crores) in developing back-end infrastructure. They say this clause should not be mandatory for subsequent investments. To clear the air, the Commerce and Industry Ministry has called a meeting of 10-12 global multi-brand retailers to understand their concerns on the clause.

The meeting will be held on June 27 before the government issues a final modification on the 50 percent investment clause. According to the government’s policy, at least 50 percent of the foreign investment, excluding land costs, should be made in back-end infrastructure within a period of three years from the first tranche of investment. Back-end infrastructure would include investments made in processing, manufacturing, distribution, design improvement, quality control, packaging, logistics, storage, warehouse, agriculture market or produce infrastructure.

Incidentally, the government has not made it clear in the recent clarification provided in FDI policy in multi-brand retail trade whether the mandatory investment of 50 percent in back-end infrastructure would need to be on a cumulative investment basis or only on the minimum investment.