Home »  News »  India »  Mumbai

'DNA' Exclusive: Too many walls to scale — FDI in multi-brand retail has no takers

Saturday, 16 March 2013 - 8:00am IST | Place: Mumbai | Agency: dna
Waiting to shop at a Walmart or Tesco store? The wait will be long. Very long.

Waiting to shop at a Walmart or Tesco store? The wait will be long. Very long. Six months after the government allowed 51% FDI in multi-brand retail, it is yet to receive a single proposal.

There is zilch interest, according to a statement by Namo Narain Meena, minister of state for finance, on Friday. Experts and analysts said it is not surprising.

Arvind Singhal, chairman of retailing consultancy Technopak, says the way the policy is structured, “it is unviable and completely infeasible” to foreign retail chains. The clause that a minimum $50 million be invested to build back-end infrastructure is a huge challenge for any retailer.

“Logistics and supply chains are now handled by third-parties, not retailers. No foreign retailer wants to bet such a huge sum only on the backend,” Singhal said.

Sourcing norms, especially the rider that 30% of sourcing has to be done from micro and small enterprises, is also an irritant.

Harminder Sahani of consultancy Wazir Advisors said this may be okay in case of vegetables and fruits, but for electronics and apparel vending, it is a huge challenge. “Smaller local players can’t fulfil the needs of big chains. Even if they do source, smaller volumes means there will be no economies of scale.”

The biggest hurdle is that every state has to give clearance individually for setting up of a store. Deep Mukherjee, director, India Ratings and Research, said only nine states and two Union Territories have approved the policy. “Since it is a state issue, it will not be possible for retailers to have a pan-India presence. Most states have opposed this. This makes the administration work very tough and complex,” he said.

Political uncertainty is a huge deterrent. With elections slated next year, who will be in power is anybody’s guess. The BJP has said it won’t allow FDI retailers to set up shop in India.

So then, continue shopping where you have been.

The hurdles
Retailers can set up shops only in cities with a population of a million. No retailer will come if it is not allowed in the top 10-20 cities 

Every state has to give clearance individually for setting up of a store.  Only two states and nine Union territories have approved the policy

Govt has cleared 63 proposals for FDI in single-brand retail, Anand Sharma, Union commerce and industry minister, said on Friday

@Nupursays




Jump to comments