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India allows FDI in multi-brand retail and aviation, finally

Signalling a major change in its intention to go ahead with key reforms, the government has approved FDI in multi-brand retail and aviation and also gave its nod for disinvestment in four PSUs

 

In a major decision, the Indian government on Friday approved foreign direct investment (FDI) in multi-brand retail, aviation sector and broadcast services while permitting divestment in four state-run companies including NALCO, MMTC, Hindustan Copper and Oil India. While operationalising the 51% FDI in retail, the Union Government left it to the state governments to allow setting up of such stores.

The decisions are being interpreted as a major signal from the government of its intention to go ahead with key reforms negating an image of policy paralysis. The decision to allow 51% FDI in retail will be a game-changer for the estimated $590 billion (Rs29.50 lakh crore) retail market dominated by neighbourhood stores.

According to experts, this move would benefit large retailers like Pantaloon, Bharti Retail as well as consumer, who can expect prices to come down by 10-15% in large format stores. Retail giants will play a significant role in improving supply and distribution systems in the country with economies of scale, superior expertise and trained staff, feel the experts.

For single-brand retail, the Cabinet decided that any firm seeking waiver of the mandatory 30 per cent local sourcing norms would have to set up a manufacturing facility in the country, said a Union minister, who asked not to be identified after the cabinet meeting. He said since the implementation of the decision (FDI in multi-brand retail) was put on hold, it had to go to the Cabinet again before going ahead with the decision.

The Cabinet also allowed FDI in aviation by foreign carriers. It also raised the FDI cap on various streams of broadcast services by up to 74%.

Earlier in November last year, the Cabinet decided to remove the 51% cap on FDI in single brand format under which companies in food, lifestyle and sports business run stores. The big retailers were required to bring in minimum investment of $100 million, of which half should be in the back-end infrastructure like cold chains, processing and packaging. These players would have to source at least 30% of manufactured and processed products from small-scale units.

Anticipating the move to allow FDI, retail stocks, including Pantaloon Retail, Provogue India and Koutons Retail, rose 2-8%. Shares of Future Group company Pantaloon Retail jumped 6.9% to settle at Rs157.60, while Provogue India climbed 6.6% to Rs16.04 on the BSE. Among others, Brandhouse Retails soared 8%, Koutons Retail India gained 4.9%, Shoppers Stop (2.8%) and Tata Group retail unit Trent (2.3%) also notched up smart gains.

Similarly, shares of aviation companies like Kingfisher Airlines, SpiceJet and Jet Airways soared up to 8% on the BSE. Kingfisher Airlines settled 7.9% higher at Rs10.81, SpiceJet rose 4.4% to close at Rs34.50 while Jet Airways shares gained 2% to close the day at Rs368.35. The BSE benchmark Sensex ended 443.11 points higher at 18,464.27.

Currently, international retailers are already present in India through their cash and carry model (selling to other retailers and business establishments), where 100% FDI is allowed. Wal-Mart runs its cash and carry business in partnership with Bharti Retail, Tesco runs its cash and carry business in partnership with Trent, owned by the Tata Group.

According to a retail report authored by Boston Consulting Group (BCG) and CII, current size of organized retail in India stands at close to $28 billion or 6%-7% of total retail market. The total retail market is estimated to grow to $1,250 billion by 2020, of which 21% would be organized. With added capital investments from key overseas players, the sector would have the potential to significantly impact the Indian economy, the report said.

 
Foreign airlines can now pick up 49 per cent stake in India's domestic carriers, a step that is expected to give a boost to cash-strapped aviation industry.

The Cabinet Committee on Economic Affairs (CCEA) also approved the proposal to allow foreign carriers to buy 49% stake in domestic airlines. "The cabinet today approved the proposal of allowing foreign airlines to pick up to 49 per cent stakes in Indian carrier. Though FDI of upto 49%, 75% and 100% was there in aviation sector, foreign airlines were not allowed," Civil Aviation Minister Ajit Singh told reporters after the meeting.

Current FDI norms allow foreign investors, not related to airline business, to directly or indirectly own an equity stake of up to 49% in Indian carrier.

Allowing foreign airlines to pick up stakes in Indian carriers has been a long-pending demand of the aviation sector.

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COMMENTS

indraneel

4 years ago

All those who are opposed to FDI in retail are simply trying to gain political mileage out of it.

In the 53 cities that have been identified, have they ever asked the kirana store owner, whether he makes a profit every year? What with corrupt officers from various government departments [VAT/SALES TAX, FOOD AND DRUG ADMIN, WEIGHTS AND MEASURES] paying regular visits for harassment and subsequent bribes. Are the
Kirana store owners aware of the extent of loss due to pilferage, shortage and wastage due to rodents? There is a tradition of customers buying kirana stuff on credit from the shop. What is the percentage of bad accounts every year? How many licenses and permits does the kirana store owner has to obtain and maintain?

In this big cities, are the kirana shopowners able to find labour for a 12 hour duty?

Has anybody asked the kiranawalla’s grownup children, whether they are going to continue their traditional business of kirana stores after finishing school/college ? They don’t want to smell of ghee and oil and garam masala!

The days when all the family members used to lend a hand from morning to night in running the kirana store are over. Firstly, families have become smaller. Secondly, young members of the family are away at school or college or coaching classes. So, you think the shopowner can single handedly run his shop at a profit?

In these big cities, isn’t the number of small kirana stores being converted to more glamorous retail outlets for mobile handsets, eyewear, ice cream parlours, readymade garments, footwear, faux jewellery etc ? It can be proved that all these lines are more profitable than kirana.

If the small kirana shop owners themselves are not complaining what are you guys shouting about?

Have, Mamatadi or Mayawati or Jayalaitha or Mr Jetley ever spent half an hour at a kirana store and observed what their problems are ? Can the kirana Shopowner buy directly from the farmer and sell the stuff? NO. There are so many middlemen.

When the political parties side with the hawkers, they conveniently forget their ( now) favourites, small shopkeepers.

VIKAS SIVARAMAN

4 years ago

That our largely somnambulant PM has finally shown some signs of waking up is shocking and it does raise some doubts whether he has decided to get off the right side of his bed!
Why reforms in FDI and Airlines? Why not infrastructure? Why not minerals and mining? Why not agriculture? Finance? Education? Or any of the myriad areas that would directly benefit us?
Every economist worth his salt has pointed out that allowing FDI in retail will wipe out small retail businesses. Big retail companies will swallow up or simply crush small retail. While the governments refrain is that it will have beneficial spin offs - employment, investment, competitive pricing etc., let the past hold a torch to their fantasies - how quickly did Indian FMCG goods get wiped off the map? Do you hear more of Godrej and Voltas or are you hearing Samsung and LG? Do you hear Maruti or do you hear Honda? Have you really known of any FMCG goods prices coming down due to competitive bands? Or have you heard more of the prices going up each annual budget due to increase in taxes? So then is the thinking that FDI will lend some much needed financial support to our teetering balance of payment situation ? I wonder which multinational will want to invest here in the current rampantly corrupt political scenario.
Obviously the beneficiaries will be the politicians - and their cohorts - the industrialists. Industry will benefit and make suitable financial contributions to their political masters so that the politicians can then run a financially attractive campaign during the upcoming elections. Notice how the opposition is mum on this whole caper? They are quietly licking their chops. They will benefit from this party's valiant attempts to champion the cause of the common man.
Vijay Malya will probably resurrect his airlines not thanks to the govt's 'enlightened' policy making but in reality due to the NPA roster of the banks that have lent to the airlines industry liberally under a former aviation minister. But now airlines need to have additional funding to stay operational and Indian Banks have gone over any sane reasonable limit a long time back. So now we need the great white god to pump in some money into a hugely mismanaged, failing aviation sector. And pray that it may turn things around so they can recover some of their losses and pay back the banks into which you, Mr Common Man, have deposited your precious hard earned money!. The government, ofcouse, has taken due note and done the needful. The only guy laughing all the way to Switzerland is Praful Patel.
That our largely somnambulant  PM has finally shown some signs of waking up is shocking and  it does raise some doubts whether he has decided to get off the right side of his bed!
Why reforms in FDI and Airlines? Why not infrastructure? Why not minerals and mining? Why not agriculture? Finance? Education? Or any of the myriad areas that would directly benefit us?
Every economist worth his salt has pointed out that allowing FDI in retail will wipe out small retail businesses. Big retail companies will swallow up or simply crush small retail. While the governments refrain is that it will have beneficial spin offs - employment, investment, competitive pricing etc., let the past hold a torch to their fantasies - how quickly did Indian FMCG goods get wiped off the map? Do you hear more of Godrej and Voltas or are you hearing Samsung and LG? Do you hear Maruti or do you hear Honda? Have you really known of any FMCG goods prices coming down due to competitive bands? Or have you heard more of the prices going up each annual budget due to increase in taxes? So then is the thinking that FDI will lend some much needed financial support to our teetering balance of payment situation ? I wonder which multinational will want to invest here in the current rampantly corrupt political scenario. 
Obviously the beneficiaries will be the politicians - and their cohorts - the industrialists. Industry will benefit and make suitable financial contributions to their political masters so that the politicians can then run a financially attractive campaign during the upcoming elections. Notice how the opposition is mum on this whole caper? They are quietly licking their chops. They will benefit from this party's valiant attempts to champion the cause of the common man.
Vijay Malya will probably resurrect his airlines not thanks to the govt's 'enlightened' policy making but in reality due to the NPA roster of the banks that have lent to the airlines industry liberally under a former aviation minister. But now airlines need to have additional funding to stay operational and Indian Banks have gone over any sane reasonable limit a long time back. So now we need the great white god to pump in some money into a hugely mismanaged, failing aviation sector. And pray that it may turn things around so they can recover some of their losses and pay back the banks into which you, Mr Common Man, have deposited your precious hard earned money!. The government, ofcouse, has taken due note and done the needful. The only guy laughing all the way to Switzerland  is Praful Patel.
Unfortunately for the aam janata ignorance is bliss. Why there is no popular opposition - I think it really is time for an uprising - against the blatant disregard by politicians of the common good of the electorate at large baffles me endlessly. It's actually we, the people of this country, who are to blame. We just don't seem to want to defend our general well being any longer. We seem to be perfectly willing to be ruthlessly trampled upon time and again by the very people who we elect to safeguard our well being. Gone are the days when popular uprisings brought governments swiftly to their knees and forced them to execute an even quicker volte face time and again on questionable policies they tried to ram past what they thought was a cerebrally dead electorate. Remember VP Singh and Mandal commission? 
But today all the common man gets is a swift kick in the @&#%s!

Shadi Katyal

4 years ago

Tje question one should ask why is GOI involved in such Permit Raj tactics when it should be out of any public services. Why does GOI has any function or control of FDI in retail or even any industry.Should by now all PSU should be sold or dissolved? Let there be free trade and investment in industry.Let the State Govts decide for any new industry and Ministry of Industry,Commerce etc should be abolished and let people take the benefits of employment etc.
Why is the white elephant AIR INDIA not on the block,not that anyone will invest in it.

Coalgate: Supreme Court seeks Centre's explanation

The Supreme Court also questioned as why the names of politicians and their relatives have cropped up among the alleged illegal allotees of coal blocks in which the policy of "competitive bidding" formulated by the government in 2004 was not followed

 
New Delhi: The Supreme Court on Friday refused to entertain Union government's plea not to hear a public interest litigation (PIL) on alleged irregularities in the allocation of coal blocks and sought an explanation whether guidelines were flouted in allotments, reports PTI.
 
The apex court, which turned down the Centre's contention that the petition based on the Comptroller and Auditor General of India (CAG) report which is under the scrutiny of the Public Accounts Committee (PAC) of the Parliament cannot be considered, said "the petitioner has sought to point out illegality and there is nothing wrong in it." 
 
A bench comprising justices RM Lodha and AR Dave said the prayer seeking a direction for alleged "unconstitutional" and "arbitrary" allocation of coal blocks "requires explanation from you (centre) because it is not the distribution of state's property in small scale but it talks about tons of largesse." 
 
Further, the bench questioned as why the names of politicians and their relatives have cropped up among the alleged illegal allotees of coal blocks in which the policy of "competitive bidding" formulated by the government in 2004 was not followed.
 
The bench rejected Solicitor General Rohinton Nariman's contention that the petition based on the CAG report was "premature" as the Public Accounts Committee (PAC) headed by senior BJP leader Murli Manohar Joshi was slated to examine it from 20th September about the correctness of allocation. 
 
"Nevertheless, keeping in view the CAG is a constitutional functionary and whether its report is final or not, it has a value. And here the petitioner has sought to bring point to show illegality and there is nothing wrong.
 
"Least is we concerned with the correctness of report which will be examined by the PAC or Parliament. But we can rely on it (CAG report)," the bench said adding that "these are different exercises (before the court and PAC)." 
 
"There is a difference in the exercise done by the PAC. Parliament and PAC can proceed with the issue on the basis of the CAG report. We don't want to encroach upon their exercise but the petition raises different things altogether. There are sufficient averments which require explanation from you," the court said.
 
Issuing the notice to the Indian Government, the bench also made it clear that it is confining itself only to the aspect of guidelines formulated by the Centre for allocation of coal blocks and directed the Secretary, Ministry of Coal, file a detailed affidavit within eight weeks on the guidelines and policies followed on the subject of allocation of coal blocks.
 
The court passed the order while hearing a PIL filed by advocate ML Sharma on the alleged coal blocks scam which has purportedly caused a huge loss to public exchequer.
 
The bench said the affidavit shall cover the guidelines framed by the government for the allocation of coal blocks.
 
It said the Secretary should also elaborate the process adopted for allocation of these coal blocks and whether the guidelines had an in-built mechanism to ensure that the allocation of coal blocks does not lead to distribution of largesse unfairly in the hands of few private companies. 
 
The bench also sought to know whether the guidelines for allocation of coal blocks were strictly followed and whether by their allocation, the objectives of policies were realised.
 
The bench wanted to know what were the hindrances for not following the policy of "competitive bidding" adopted by it in 2004 for allocation of the coal blocks.
 
Lastly, the court sought to know what steps were proposed to be taken against the allottees who have not adhered to the terms of allocation or have breached the agreement.
 
The apex court also made it clear that it is primarily concerned with the aspect of the adherence of the guidelines and policies concerning the allocation of coal blocks and all other aspects including the demand for the CBI probe into the alleged irregularities is not taken at this stage.
 
During the hearing, the Solicitor General informed the bench that the criminality aspect of the alleged irregularities in the coal block allocation was already being looked into by the Central Bureau of Investigation.
 
"We are at present touching the allocation part and no other thing," the bench said.
 
"Our focus is on the issue of guidelines followed in the allocation of coal blocks," it added.
 

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SC quashes High Court's gag order on reporting troops movement

The apex court said Allahabad High Court erred in passing such order as ban on media was not sought and the prayer was only to hold an inquiry into the controversial incident

 
New Delhi: The Supreme Court on Friday quashed Allahabad High Court order, which had prevented media from reporting on the controversy related to alleged Army units' movement towards Delhi on 16th January amid the then prevailing row over erstwhile Army Chief VK Singh's date of birth, reports PTI.
 
A bench of justices HL Dattu and CK Prasad allowed the plea of Press Council of India (PCI) which had challenged the order saying that court cannot impose such a ban on media as it violates the freedom of speech.
 
The bench said the High Court erred in passing such order as ban on media was not sought and the prayer was only to hold an inquiry into the controversial incident.
 
"We are of the opinion that the High Court should not have passed the order as the prayer before it was entirely different and it was inconsonance with the prayer made by the petitioner," the bench said.
 
The Court also took into account its recent Constitution bench judgement which had said press can only be directed to postpone the reporting for a certain period.
 
The Centre also said it was against the High Court's order and it should be quashed.
 
The High Court had directed various Central and state government authorities on 10th April "to ensure that there is no reporting/release of any news item by the print or electronic media on the movement of troops." 
 
The high court's order was passed on a PIL which said a national daily and a news magazine had reported on movements of the Army units from Agra to Delhi when the Singh's age row controversy was at peak. The petitioner had said the reports were against national interest.
 
The PCI had approached the apex court saying the order was in violation of the fundamental right under Article 19(1) (a) of the Constitution, granted to the media and every citizen of the country.
 

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