FDI in Retail Trade

FDI in Retail Trade

The Union Government by issuing a Notification on 20th September, 2012 has allowed the entry of FDI in Retail which will be much detrimental to traders, farmers, hawkers, transporters, small industries, consumers and other sectors of Retail Trade of India. About 5 crore business establishments and more than 22 crore people dependent upon retail trade for their livelihood will be adversely affected.

The Government has issued notification in great haste without considering its impact on Indian economy and retail trade. The following grounds are self sufficient to make out a case of mal-intention of the Government and compel to derive the conclusion that some kind of “invisible force” is working behind this act of the Union Government. Let us analyze in brief the above charges against the Government.

a.  Democratic Process Not Followed 

1. The unanimous report of the Department related Parliamentary Standing Committee submitted to bothhouses of the Parliament on 8th June,2009 was never consulted by the Government and neither it has been accepted or rejected. The said report is still pending before both the houses of Parliament. 

2.  In utter disregard of the parliamentary process, the Department of Industrial Promotion and Policy, Ministry of Commerce mustered enough courage in releasing a Discussion Paper on FDI in Retail in July, 2010 and sought public opinion. About 180 responses were received by the DIPP out of which about 120 responses were found to be against and rest about 60 responses were in support of FDI. The Government completely overlooked the majority view.

3.  The stakeholders including Traders, Farmers, Hawkers, Transporters, Small Industries, Consumers and others were never consulted on this major issue which will have wider impact on all these sections.

4.  The solemn assurance made by the then Finance Minister Shri Pranab Mukherjee in the Parliament that only after having “consensus” between political parties, States and Stakeholders, the fdi in retail will be allowed, has been totally bye-passed. 

5. The FDI Policy documents laid in the Parliament by Union Commerce Minister Shri Anand Sharma on 25th November, 2011, have been grossly destroyed by the Notification issued on 20th September, 2012.

b.  Misleading the Nation by quoting incorrect facts and figures

1.  Every responsible person in the Government including the Ministers and the Bureaucrats

repeated 30% to 40% food wastage in India and advocated in loud voice the need of FDI to develop backend infrastructure. This figure is completely false, baseless and misleading.

2.  The Indian Council of Agricultural Research (ICAR), a body under the Ministry of Agriculture, commissioned a post harvest loss study with Central Institute of Post Harvest Engineering & Technology (CIPHET), Ludhiana and submitted its report to Government in September, 2010 which clearly state that food wastage in India is only between o.8% to 10% except mushroom which is 12.5% and Guava which is 18%. In spite of knowing the factual figures, the Government kept repeating the same till now. 

3. The said figure of 40% is also included in the Union Budget 2012-13. 

c.  Major Deviations between FDI Policy laid in Parliament and Notification issued on 20th Sept,2012 

1.  In Multi Brand Retail policy trading of “unbranded” grains and pulses has been allowed.

2.  Development of “Cold Storage & modern transport system” as stated by Hon’ble Prime Minister in his address to the Nation on 21st September, 2012 has not been explicitly included in the definition of “backend infrastructure” in the notification.

3.  Though procurement of 30% goods from Indian Small Industries has been made but it is diluted by adding that “this procurement requirement would have to be met, in the first instance, as an average of five years’ total value of the manufactured/processed products purchased, beginning 1st April of the year during which the first tranche of FDI is received”. Thus, the global retailers will be free to outsource even 100% procurement at least for first four years from anywhere over the globe. It is further added that 30% procurement is not made on item wise basis and the global retailers will be free to select any commodity to meet the 30% requirement.

4.  The notification also provides that “In states/Union Territories not having cities with population of more than 10 lakhs as per 2011 Census, retail sales outlets may be set up in the cities of their choice”. It makes clear that global retailer will be at liberty to open retail outlets anywhere.

d.  Legislative Flaws 

1. Before issuing any notification, the Government was under obligation to amend the rules and regulations of Foreign Exchange Amendment Act (FEMA) through Reserve Bank of India and under section 48 of the said Act, it is compulsory for the Government to place any such amendment before both the houses of Parliament to obtain the approval of both the houses. Both the houses may agree, disagree or modify such amendment and have effect accordingly. 

2.  The notification violates the “Preamble” of the Constitution of India which ensures “Justice, social, economic and political” to the citizens of India. The entry of global retailers in Indian retail trade will emerge into an environment of “uneven level playing field” and large number of people shall be deprived of Economic Justice.

3.  Interpretation of the provisions of Section 6 of FEMA Act reveals that the Reserve Bank of India has no authority to amend any rule or regulation though it has the power to frame any new rule or regulations which are ultimately have to be passed by both the houses of Parliament. “The authority which frames the law only has the authority to amend the law” is the basic fundamental of jurisprudence. Therefore, in this case, it is both houses of the parliament and not the Reserve Bank of India who can amend the rules and regulations. In the above said section or elsewhere in the FEMA Act, the word “amendment” has not been used while delegating the authority to make rules. Therefore, any “amendment” by RBI is merely a proposal for the consideration of both houses of the Parliament.

e.  Supplementary Arguments

1.  The so called advantageous arguments advanced by the Government in support of FDI in Retail have not been supported by any credible evidence.

2.  Such arguments are based on merely on assumptions.

3.  The Government has not considered the fall out of such global retailers in Countries like USA, UK, and Europe etc. where these retailers have failed to provide any advantage to the respective country, which are being advocated by the Government.

4.  It will have adverse impact on traders, farmers, hawkers, transporters, small industries, consumers and other sections of retail trade and will result into mass unemployment.

5.  The Government is repeatedly saying that “so called middlemen in the supply chain should be abolished” which amply reflects that certainly large number of people will be displaced from their existing livelihood. This is a clear cut case of “Economic Injustice” as in spite of knowing the fact, the Government has not framed any rehabilitation policy for all such people to provide them Economic Justice.

6.  The Government has given outright and most extra ordinary benefits to global retailers in the notification to facilitate them to apply their business module of predatory pricing, domination, control and establishing monopoly” which is against the principle of natural justice as also will destroy the social and economic fabric of the Country.

7.  If the FDI in Retail is allowed it will pose a threat to national security as well as the global retailers when in control of the retail trade and supply chain, can dictate their own wishes and in the absence of any alternate mechanism, the Country will have to suffer.

f.  Remedial Measures

1.  Instead of allowing FDI in Retail, the Government should evolve a National Trade Policy for the retail trade under which the existing retail trade should be upgraded and modernized to meet any global challenges.

2.  In pursuance of the above a National Commission should be constituted comprising of Senior Government Officials, Retail Experts, Stakeholders and Economist to make an in-depth study of the existing retail trade, its composition and size and to find out the bottlenecks and impediments for its regulated growth and suggest remedial measures.

3.  As per the recommendations of Parliamentary Standing Committee, the Government should constitute a Retail Regulatory Authority which should be empowered to regulate the retail trade and ensure fair margin of profit from producer to consumer.

4.  A separate Ministry of Internal Trade or Retail Trade should be formed to monitor the retail trade in all aspects.

5.  A  Special Task Force of Officials and stakeholders should be constituted to study various Acts, Laws, Rules and Regulations governing retail trade to make recommendations about such laws which have lost relevance in the present scenario and need abrogation and suggest time needed “amendments” in rest of the laws. 

6.  A simplified and rationalized tax structure based on the basic fundamentals of uniformity in law, rate of taxes, charging sections  etc across the Country to make India as a Free Trade Zone and abolishing all kinds of road permits and entry forms for smooth flow of Inter-State Trade.

7.  The term “unorganized” sued for the retailers should be amended as “self-organized” and traders should be given the status of “ Tax Collectors” as we are the only agency to collect the taxes on behalf of the Government.

The traders of the Country are integral part of the Indian economy and as good citizens as others are and are fully aware of our responsibilities towards the nation and have amply demonstrated the same whenever there was a call of any national calamity or national security. We are proud to be doing largest CSR activities in the Country in form of establishing Schools and Colleges, Hospitals and Nursing Homes, large number of Dharamshala (traditional Rest Houses) across the Country, maintaining extremely large number of religious places and institutions of all sects, large number of old-age homes, orphan houses etc and doing all kinds of philanthropic activities on regular basis without any discrimination of caste, creed, race or religion and therefore the role of traders in national development should be duly acknowledged and not destroyed.