At present no FDI is allowed in front-end retail trade, but 100% is allowed through the automatic route for wholesale cash & carry business.
Retail giant wants NOC for a future front-end foray first, Bharti loath to give it
NEW DELHI: If a difference of opinion over branding of retail stores was a bone of contention between Bharti Group and Wal-Mart Inc earlier, a much larger issue is playing the spoilsport now.
The Giant of Bentonville is believed to have sought a pre-signed ‘no-objection certificate’ from Bharti since it wants to enter the front-end retail business on its own the moment current restrictions on foreign direct investments (FDI) are lifted.
At present no FDI is allowed in front-end retail trade, but 100% is allowed through the automatic route for wholesale cash & carry business.
Wal-Mart is believed to have sought the backing of the US government and its ambassador in India to push its case.
It wants the government to scrap Press Note 1, which makes it mandatory for a foreign company having a joint venture in India to get an NOC from the local partner before branching out on its own.
The US giant is keen to enter the lucrative front-end of the retail business as soon as government regulations permit it, and wants to do so without the encumbrance of a local partner.
But whether the government — sections of which have already expressed strong opposition to Wal-Mart’s “backdoor” entry into retail trade — would oblige remains to be seen.
Bharti Group chairman Sunil Bharti Mittal had told DNA Money late last month that, “Whenever government opens FDI in retail, Wal-Mart is absolutely welcome to come in the front-end.”
Shrugging off suggestions that Wal-Mart may want to get into the front-end on its own, he had asserted: “Wal-Mart will be brought to the front end in partnership with us… Why have they partnered us for the back-end business otherwise?”
Sources said the two parties are unlikely to sign any agreement (and therefore commence operations at least in the wholesale cash & carry business) unless this tricky issue of an NOC is sorted out.
It is believed that the Bharti Group has expressed its unwillingness to give any pre-signed NoC, but this could not be confirmed.
A Bharti spokesperson denied the NoC was holding back the two sides from signing on the dotted line.
In an e-mail response, a Wal-Mart spokesperson said, “Our wholesale cash & carry joint venture agreement with Bharti is making good progress and is at present at a stage where routine legalities are in the process of being finalised. An announcement will be made in due course. As you will appreciate, our business discussions are confidential. We do not comment on rumour or speculation.”
The branding of front-end stores has not been agreed upon till date, with Wal-Mart insisting that its name be used only on stores which are 50,000 square feet or more in size.
Till these contentious issues are resolved, Bharti and Wal-Mart are unlikely to announce their much-awaited pact.
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