Retail FDI: India plans to amend its antiquated labour laws

December 6th, 2012

NEW DELHI: The government plans to revolutionise the retail sector to make India a global shopping hub, with new labour laws to support 24-hour business, limiting reckless multiplication of malls to prevent urban chaos, and strong measures to ensure small shopkeepers also thrive in the transformation.

The consumer affairs ministry also wants to allow farmers to directly sell their produce to retailers, and adopt a uniform countrywide licensing regime to accelerate retail growth. The issue of modernising retail to ensure that benefits reach every section of society was debated in the cabinet when it approved FDI in multi-brand retail.

To facilitate such far-reaching changes, the government plans to set up a committee of central ministers of agriculture, commerce, corporate affairs, environment, finance, food, labour, railways, urban development and infrastructure ministries, official sources said.

Another panel of secretaries, representatives from IIMs, industry bodies, consumer activists and trader associations will also study the retailing sector. The move is expected to bring on board small traders and shopkeepers, who are apprehensive about loss of business if large international companies set up shop in India.

Traders welcomed the move. “This is a fantastic method to take things forward… It will smoothen out trade at pan-India level,” said Kumar Rajagopalan, head of Retailers Association of India, which has 400 modern retailers as members.

The government panel will discuss ways to modernise labour laws and amend them to be more supportive of retail requirements pushing for 24x7x365 work environment. It will also look at means to reduce multiple licensing requirements and offer a single-window facility for retail operations throughout the country.

Safeguards for Small Stores

“It will also consider establishing a national commission to study the problems of retail sector,” said a consumer affairs ministry official.

Madan Sabnavis, chief economist at CARE Ratings, said the government has safeguarded interests of small kirana shopowners and manufacturers in its notification on FDI in retail by ensuring 30% outsourcing from local small and medium industries. “Walmart, if it comes, can’t open 30-40 stores at one location even in cities like Delhi and Mumbai.

It gives enough space for small stores to operate, which can thrive on their doorstep services. The government should modernise APMC Act to create direct linkage of farmers with retailers,” he said.

However, Dharmendra Kumar, director, India FDI Watch, an NGO that has opposed the entry of foreign retailers, said the government should have sufficient regulatory framework to control the rampage of foreign retailers entering the Indian space. “There is no cap on the number of stores a big retailer can open in a city. Nor there is any specification on size of the store. In absence of such regulations, these supermarts can open in any location interfering with the operations of small stores,” he said.

The panel, however, is looking at putting some safeguards in place to help small stores. “It will work out a legal and regulatory mechanism to ensure that large retailers don’t displace small ones and even misuse their higher buying power to create a one-sided price war besides setting up in-built policy to relocate or reemploy people who are affected due to opening up of big malls in the vicinity of their shops,” another official of consumer affairs ministry said. The committee will also consider recommendations of the parliamentary standing committee on retail sector, and suggestions of the study on organised retail by the Indian Council for Research on International Economic Relations (ICRIER).

ICRIER had endorsed the entry of branded chains in retail sector, saying the sector is likely to grow at 13% till 2011-12 with organised retail growing at 45-50% in this period and unorganised retail at about 10%.

A recent study by ICRIER on facilitating trade has argued that pan-India supply chains cannot be established unless GST is implemented. Arpita Mukherjee, professor, ICRIER, said retailers face multiple regulations that vary across states and this creates hurdles for smooth functioning.

“For example, the central government can have a model Shops and Establishment Act that states can implement. This Act should have provisions for modern retail to operate such as possibilities to employ on a rotational basis and flexibilities in shop opening timings. If these reforms are implemented within two years, it will lead to investment in backend and help to reduce wastage,” she said.


Vote on FDI Retail?

November 14th, 2012

The winter session of Parliament would begin on 22nd November and is likely to end on 20th December. It is unlikely to have business as usual unless the issue of FDI in Retail is discussed in Parliament. CPM has already moved for an adjournment motion under rule 184 forcing for a vote (if the notice is allowed by the speaker) on the Govt. decision to allow FDI in Retail. Mamata Banerjee’s TMC which has already walked out of Govt. on the issue too is sure of moving a no trust motion. Govt. ally DMK is also against the centre decision. Feeling the heat, Prime Minister, heavily depending on outside support of BSP and SP is having lunch and dinner with their supremos.

In the meantime, stakeholders would keep the pressure on by street actions. Hawkers would hold a mass rally in Kolkata on 24th November whereas small retailers would organize protest outside parliament on 26th November.


Farmers’ Demands on FDI

November 5th, 2012
Please find attached the monthly magazine of farmers union with many article on FDI Retail including editorial and my contribution (page 30-31).
The winter session of parliament would begin on 22nd Nov. We all are still in the war field. There could once again be a all out political solidarity in the Parliament to push the Govt. on back foot.
Congress organized a huge rally yesterday in Delhi in favour of FDI Retail where the PM, Sonia Gandhi and Rahul Gandhi all spoke in favour of FDI Retail. BJP organized street protests throughout Delhi against FDI Retail terming the rally day as black day. We all also organized a protest joined by senior politicians.

RBI must amend FEMA rules on FDI in retail: Supreme Court

New Delhi, Oct 15: The Foreign ExchangeManagement Act regulations should have been amended by the Reserve Bank of India before the Centre cleared 51 per cent FDI in multi-brand retail, the Supreme Court said today.
The apex court made this observation while hearing a Public Interest Litigation that was filed by Advocate ML Sharma. He argued that retail trading is barred under the existing FEMA regulations.
Attorney General GE Vahanvati admitted that the government had erred since the RBI had not effected any change in the regulations after 2008.
The Supreme Court bench of Justice RM Lodha and Justice AR Dave then said that “it is an irregularity that is curable and as soon as amendment is brought, it would be cured.”
Stating that this irregularity is not enough to warrant a stay on the policy, the court emphasised that RBI must amend the rules without delay.
“This is a must before the policy is given a legalshape,” the judges said. They demanded to know when the RBI will take the necessary steps. Vahanvati assured that he will ask the RBI governor to immediately amend the FEMA regulations.
The court, however, rejected the petitioner’s other contention that prior approval from the President or Parliament was needed for the Centre’s notification on FDI in retail.
“This assumption that the policy has to be in the name of the President is flawed and unfounded. The Constitution does not provide that the policy should be in the name of the President,” the judges said.
Pointing out that Parliament does not look into policies, the court said that a policy can be deemed as incorrect only if the relevant notification is ultra vires of the law.
The court has given the government time till the next hearing on Nov 5 to amend the FEMA regulations. It is to be noted that the Trinamool Congress walked out of the ruling coalition just days after the UPA allowed 51 per cent FDI in retail. The exit of the Mamata Banerjee-led party meant that the government was reduced to a minority.

Walmart-Bharti Deal to Be Probed After Allegations of FDI Norms Violation

October 11th, 2012

New Delhi: The Prime Minister’s Office (PMO) on Thursday ordered a probe into the deal struck between US retail giant Walmart and Indian retail major Bharti after allegations of norms violation by Communist Party of India (CPI) Rajya Sabha MP from Kerala, MP Achuthan.
Achuthan alleged that the investment deal by Walmart with Bharti violated FDI norms and he charged the US company of end-use violations. He further charged Walmart of deliberate intent to bypass rules. The PMO has directed the Department of Industrial Policy and Promotion (DIPP) to examine the charges.
On Wednesday, Trinamool Congress chief and West Bengal Chief Minister Mamata Banerjee demanded that the deal between the two companies be terminated. The world’s largest retailer Walmart came under question in India for the nature and manner of its investment in Bharti retail. Achuthan raised the matter in Parliament during the monsoon session. On Wednesday, Mamata went public with a demand that the investment be annulled for alleged violation of Indian norms.
New facts emerging from a mix of sources allege that a March 2010 investment by Walmart Holdings worth Rs 456 crore in Cedar Support Services Ltd, a company that was originally known as Bharti Retail Holdings, was illegal, with the entire structure rigged in a manner that was aimed at getting around the complete bar on foreign investment in the Indian multi-brand retail sector.
Sources have provided CNBC-TV18 with a detailed account of these allegations. Detailed questionnaires were sent to the Bharti group as well as Walmart. While the latter did not respond to any of the queries, a Bharti spokesperson said, “We are in complete compliance of all regulations. All details have been shared with the relevant authorities.”
The allegation is that Cedar Support Services (earlier Bharti Retail Holdings) was carrying out multi-brand retail business in India through a 100 per cent subsidiary – Bharti Retail. December 2009 saw amendments to the articles of Cedar enabling it to provide services as a real estate consultant. In itself, this change was innocuous, especially as India allows 100 per cent FDI in consultancy services and that too under the automatic route.
Just four months later, March 29, 2010, the next step unfolded when Cedar issued 455,800,000 zero per cent compulsorily convertible debentures with a face value of Rs 10. These were convertible into 425,965,859 equity shares at a premium of 70 paise per share. In effect, Walmart Holdings invested Rs 456 crore in a company that was a real estate consultant.
Till early September, the government of India told Parliament that the Reserve Bank of India does not have any record of FDI in Cedar. So the question is what did Cedar do with these funds – roughly $ 100 million. The entire funds are alleged to have been invested by Cedar in its wholly owned subsidiary – Bharti Retail, the company that has been engaged in the business of multi-brand retail. India permitted 51 per cent FDI in multi-brand retail only this September.
Specific questions as to whether Bharti or Walmart has at any point ever informed the RBI about this were not answered by the two companies. Incidentally, Walmart will own 49 per cent in Cedar upon conversion of the debentures. The original conversion date was September 2011, which was then extended to September 2012.
There are other curious aspects that emerge from the joint venture agreement executed between Walmart, Cedar and Bharti Retail (the Cedar subsidiary that operates multi-brand retail stores under the Easy Day brand name). Given that Cedar was a consultant in the services space, questions are being asked as to why did this agreement of March 25, 2010, have Bharti Retail as a party.
The allegation is that the Articles of Association of Cedar show that Walmart has the right to sell the debentures or Cedar shares to Bharti shareholders based on a valuation that used for the retail industry and comparable trading multiples for Indian retailers. The Articles further impose certain restrictions on transfers and allotment of shares to competitors with the competition being not a similar company but a retail operation.
So the question arises whether this money was ever intended to be used for the services or for investment in operating multi-brand retail. The government’s earlier response has been only to point towards the RBI, but given the nature of the allegations, it is clear that a detailed clarification is perhaps needed from all involved.

People Reject FDI in Retail in the Public Hearing Organized by East Delhi Municipal Corporation

September 28th, 2012

Trade Unions, Street Vendors Associations, RWAs & Civil Society expressed their opinion: 98% voted against FDI in Retail in the opinion poll
Respecting Peoples verdict EDMC will not grant trade licences to FDI Retailers: Mayor
In an unprecedented initiative, East Delhi Municipal Corporation (EDMC) organized a public hearing to take note of the peoples’ opinion on the issue of FDI in Retail. People from all sections of society including street vendors, small shop keepers, trade unions, resident welfare associations, civil society representative participated in the public hearing.
Delivering the opening remark, Dr. Annapurna Mishra, the Hon’ble Mayor of East Delhi said that the purpose of the initiative is to take note of the peoples’ voice to help the corporation in shaping trade policies.
An opinion poll was also conducted to know the views of participants. 98% participants opined against FDI in Retail.
Hakim Singh Rawat, R B singh Rajpoot, Sodan Singh, Bijender Yadav, Pravesh Sharma, Bansi Lal (street vendors), Praveen Khandelwal, Satish Garg, Raj Kumar Bhatia, Om Prakash Dubey, Deepak Sharma (Traders), Ashwini Mahajan (SJM), Aneesh Mishra (trade union) Vikramjeet Banerjee (Advocate) and many others expressed their view on FDI in Retail.
Concluding the public hearing senior journalist Sh. Ram Bahadur Rai said that in the past the Prime Minister was against FDI in Retail. He alleged that such policy decisions are influenced by powerful international lobby groups.
The Leader of opposition, Ms. Varyam Kaur, who was also invited for the public hearing came at the closing stages and abruptly interrupted the meeting shouting that the Municipal Corporation can not organize such event.
The Hon’ble Mayor stated that public opinion is evident on the issue of FDI in Retail and respecting the peoples’ verdict the EDMC would bring a motion to oppose FDI in Retail and would not grant any trade licences to FDI retailers.  She said that a detailed report of the proceedings would be send to the Hon’ble Lt. Governor and Chief Minister of Delhi.
Dharmendra Kumar of India FDI Watch conducted the proceeding.
For Photos click:


More States Pass Resolutions Against FDI in Retail

September 27th, 2012

States of Tamil Nadu and west Bengal have passed resolution against FDI in retail. So no Walmart in Chennai or Kolkata. In the meantime, Walmart opened its 18th wholesale store of India in Hyderabad, the capital city of Andhra Pradesh.