Companies & Sectors
FDI in multi-brand retail: Clarifications are ambiguous

We have always talked of “single-window clearance” for decades now.  This is yet to materialize, but in the meantime, to confuse and compound the issue, the Department of Industrial Policy and Production (DIPP) has stated that a multi-brand entity cannot engage in any other form of distribution

Our government works slowly. Almost everything is done by non-professionals and investment plans are delayed considerably due to lack of planning and, more often, foresight.  The chosen words are ambiguous, perhaps, intentionally!

 

The issue of permitting foreign direct investment (FDI) in multi-brand retail trade was announced nine months ago. The proposal, itself, was ambiguously worded, presumably in order to permit amendments and corrections on the way to its development.

 

The original idea was to ensure that these foreign giants do a 30% sourcing from indigenous small and medium supplies. The commerce and industry ministry has now clarified that these small and medium industries must have investments in plant and machinery, not exceeding $1 million. This excludes fresh produce and caters only to manufactured and processed items.

 

So, before the FDI gets into a business act in this area, they need to ensure that they are dealing with an entity complying with the above stipulation. Would they need someone’s certificate or attestation before the work commences?

 

The new set of clarifications issued by the commerce and industry ministry further stipulates that these front-end stores will have to be company owned and operated, which means they can not be franchised. Does this mean that every city/town they enter will be treated as a “new unit”?

 

We have always talked of “single-window clearance” for decades now.  This is yet to materialize, but in the meantime, to confuse and compound the issue, the Department of Industrial Policy and Production (DIPP) has stated that a multi-brand entity cannot engage in any other form of distribution. What happens if it decides to go in for a processing industry allied to the products that it handles?

 

Why not one ministry or special organization handle all issues relating to Foreign Direct Investments?  This apex authority must be able to answer all the questions that may arise rather than several departments and ministries coming in the way.

 

In the multi-brand retail, FDI is expected to bring in $100 million, 50% of which is expected to be in “back-end infrastructure”. Since foreign retail cannot enter the market through acquisition of existing retail chains, they will have to operate totally independently.

 

Digressing for a moment, what would a greenhorn FDI face in India?

 

First is to choose a town or city with a minimum one million population and ensure that it has both a large enough hinterland to supply (and consume) consumer durables manufactured by the small and medium units with an investment of about $1 million in plant and machinery.

 

Second, it must have, preferably, a satellite of maybe 10 to 15 villages that can supply fresh agricultural produce, both organic and non-organic.

 

Third, it must be ready and willing to locate a suitable collection point to warehouse the products it plans to retail.

 

Fourth, FDI must bear in mind that they are now not allowed to retail through e-commerce or apply wholesale methods.  They are expected to ‘retail’ their products directly.  While a restriction on wholesale is understandable, why should there be any ban on e-trade, considering the growth of computer education in the country?

 

Fifth, why not the government take the trouble to spell out, exactly, what it means by saying “back-end infrastructure”?

 

Sixth, any responsible FDI having long-term interest in mind, will automatically plan to include a dedicated transport facility for the perishable and non-perishable products they propose to handle.

 

Seventh, they would have a separate plan or division to meet the farmers’ requirements in terms of supplying seeds, fertilizers, farm equipments, extend assistance in power supply and adjustable and other forms of temporary credits that may be required while handling agricultural produce. They would need to educate the farmer with better and improved methods of cultivation, crop maintenance and harvesting techniques too.

 

Eighth, FDIs will also do well if they plan and install packaging units to ensure quality and freshness of the produce for their exports to their home country. They would remember that there are a growing number of expatriate Indians living in their home country who generate the demand for Indian origin goods.

 

Ninth, likewise, in case of certain items like fruit pulp and juice, FDIs can also plan to include associate processing units—whether it is for fresh vegetables or fruits or both—as these will enable their direct contribution to increase employment of local people. And earn foreign exchange!

 

And, finally, all these will enable FDI to retail their supplies at competitive price, make a profit and help eliminate the middlemen to a great extent, though total eradication of these blood-sucking middlemen is unlikely, as they will somehow manage to become active in such ventures. We need to take this in our stride and watch carefully the progress this innovation brings to the country and its people.

 

(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)

User

Governance Deficit in Infosys?

From the very beginning, Infosys set standards and created benchmarks in transparency, good...

Premium Content
Monthly Digital Access

Subscribe

Already A Subscriber?
Login
Yearly Digital+Print Access

Subscribe

Moneylife Magazine Subscriber or MSSN member?
Login

Yearly Subscriber Login

Enter the mail id that you want to use & click on Go. We will send you a link to your email for verficiation
CIBIL: Customers Continue To Suffer

Who checks the quality of technology or data-matching algorithms used by CIBIL or the other credit bureaus? What is the redress process, when it fails?

At Moneylife’s ‘Open House’ with RBI deputy governor Dr KC Chakrabarty on 3rd June, an angry customer stood up to complain about Credit Information Bureau of India Limited (CIBIL), which practically enjoys a monopoly of the credit bureau business. On 4th June, we received an angry letter from one Umesh Dhawan whose Rs5-lakh loan was rejected because he was shown as a defaulter by CIBIL. He was under the impression that his banker had reported him. But we discovered that the problem was far worse. CIBIL apparently used its own algorithm to match data and ended up mixing his data with that of another person called Umesh Uhawan. Once again, the question is: Who checks the quality of technology or data-matching algorithms used by CIBIL or the other credit bureaus? What is the redress process, when it fails?

CIBIL claims that the number of incorrect credit data, because of inaccurate matching of information, is low and on par with credit bureaus of similar size abroad. Who will verify if this claim is true? And how is a customer going to be compensated for the untold harassment suffered? If, as CIBIL claims, the mismatch of data leading to wrong reporting is so low, surely, RBI can mandate compensation for customers. At present, CIBIL gets away with a vague regret letter and a correction of records, when its goof up and poor redress mechanism can ruin the financial life of its hapless victim.

 

NOTE: If you are facing similar issue, you may want to get help from Moneylife Foundation's free Credit Helpline http://www.freecredithelp.in/

User

COMMENTS

Ashok Kumar Bhargava

4 years ago

The matter is not as to what we have to pay to get our report.My emphasis was on customers reach to the data so that if some error is there it can be pointed out by the customer/client and rectification thereof is sought without delay as had been the case with Shri Dhawan.

Umesh Dhawan

4 years ago

I have recieved the following mail from CIBIL after 4 Reminders
--------------------------------
Dear Sir,

We refer to your email dated 14/6/2013 regarding your CIBIL Report.

At the outset, we apologize for the delay in response.

We would like to inform you that our Managing Director is currently travelling. We are looking into the issue and will revert to you shortly.

Thanking you.

Best Regards,

Berly Varghese
____________________________________________
Credit Information Bureau (India) Limited
Hoechst House, 6th Floor,
193, Backbay Reclamation,
Nariman Point,
Mumbai 400 021, India
_____________________________________________

Umesh Dhawan

4 years ago

I have recieved the following mail from CIBIL after 4 Reminders
--------------------------------
Dear Sir,

We refer to your email dated 14/6/2013 regarding your CIBIL Report.

At the outset, we apologize for the delay in response.

We would like to inform you that our Managing Director is currently travelling. We are looking into the issue and will revert to you shortly.

Thanking you.

Best Regards,

Berly Varghese
____________________________________________
Credit Information Bureau (India) Limited
Hoechst House, 6th Floor,
193, Backbay Reclamation,
Nariman Point,
Mumbai 400 021, India
_____________________________________________

Sucheta Dalal

4 years ago

Mr Nandy's comment is excellent. While there is so much criticism about HDFC Bank it is very nice to hear they didnt not charge anything for a credit report!

Umesh Dhawan

4 years ago

I have still not received any call back from CIBIL regarding the loss suffered by me. They think they are going to get away with it. They are harassing people.

Umesh Dhawan

4 years ago

I have still not received any call back from CIBIL regarding the loss suffered by me. They think they are going to get away with it. They are harassing people.

Umesh Dhawan

4 years ago

I received a call from CIBIL in which they told me that they will get back to me regarding compensation for the loss suffered by me. It has been 5 days and they do not have the coutesy of calling me up again. This despite I have sent a mail to their Managing Director. Pathetic is the Word for CIBIL.

Umesh Dhawan

4 years ago

I received a call from CIBIL in which they told me that they will get back to me regarding compensation for the loss suffered by me. It has been 5 days and they do not have the coutesy of calling me up again. This despite I have sent a mail to their Managing Director. Pathetic is the Word for CIBIL.

Ashok Kumar Bhargava

4 years ago

Presently a customer has to pay arround Rs.400-500 to have their own Credit rating. I think CIBIL should allow a customer to see their own data of credit rating so that they can request for rectification if some thing wrong has been reported/posted in their database. This will help customers in getting the rating corrected if any factual error exists.

REPLY

Sucheta Dalal

In Reply to Ashok Kumar Bhargava 4 years ago

You can get your credit report from your bank by paying Rs50. Please read moneylife cover story on the subject.

Dayananda Kamath k

In Reply to Ashok Kumar Bhargava 4 years ago

so we pay them for correcting their mistakes. we are giving incentive for committing mistakes. this is how new businesses are generating income.

MDT

In Reply to Ashok Kumar Bhargava 4 years ago

Dear Mr Bhargava,
Thanks for your comment.
Kindly note a customer can receive his/her credit report for less than Rs150 (varies between credit bureaus). Similarly, CIBIL charges over Rs400 for Credit Score. You may also want to read http://www.moneylife.in/article/credit-s... ; http://foundation.moneylife.in/?th_galle... and http://www.moneylife.in/article/who-is-a...
Thanks
MDT

R Nandy

In Reply to MDT 4 years ago

I had requested the credit report via HDFC Credit Cards.They have a form for making the request which needs to be posted to HDFC.It was written that Rs50 is charged for the credit report.But,they did not charge for it.I had requested it just for curiosity.

R Nandy

In Reply to R Nandy 4 years ago

This is the link:
http://www.hdfcbank.com/assets/pdf/CIBIL...

Dayananda Kamath k

4 years ago

who is to be blamed for this. it is the regulators only. they make everything compulsory using powers conferred in them, without putting in place a proper mechanism to implement the same and grievances redressal systems.

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)