Retailers across the world must have been enthused when the government threw open multi-brand retailing to foreign players in September 2012, allowing them a majority stake of 51%. Eight months later, most of them are confused about what exactly the policy says. Does the mandatory 50% of their investment that has to be made in back-end infrastructure have to be in greenfield ventures or can they buy/upgrade existing ventures? Does this 50% criterion apply only to the investments brought in the first year or does it apply to all the investment brought in over the life of the investment? None of this is clear, but what is clear is that different interpretations are being given to the media by top government officials as well as politicians. What is the wannabe retailer supposed to believe? Which is why 8 months after the multi-brand retail policy was announced, there has been no application made to the government. While the queries continue—does the 30% MSME sourcing norm apply to all of Tesco’s purchases in India or to just the purchases of the non-agricultural produce?—there is no official response on the matter.
Which is why the government needs to come out with these clarifications in writing through changes in the policy documents or press notes that deal with this. Let’s not forget that in the case of intra-circle roaming in 3G, the government notes on the questions asked in the pre-bid conferences indicated that such roaming was permissible—today, however, the government has changed its mind on the matter.
Apart from this, the government needs to show some flexibility on the policy announced. In the case of single-brand retail, the government amended the policy in September last year to soften the proposal relating to sourcing, saying it should be ‘preferably’ from MSMEs rather than mandatorily. That is exactly what is needed for multi-brand retail including in the definition of MSMEs. In addition, the government needs to appreciate how multi-brand retail is conducted the world over. Most retailers, for instance, do not run all of their cold chains and instead operate with a series of specialist logistics companies who handle large parts of their back-end infrastructure. Often, e-tailing is an integral part of the business, but this is not allowed in India. In an equally large number of multi-brand retail ventures, the kind of back-end infrastructure the government is envisaging is not even required. If these business realities are ignored and the government wants big retailers to come and set up, for instance, their own back-end infrastructure, it may be in for a big disappointment.