India: Delhi poised to attract FDI in multi-brand retail

Following the recent reform, Delhi will become the main city in India capable of attracting FDI in multi-brand retail. Precisely in order to incentivize the attraction of Foreign Direct Investment in the retail market, the city government has begun the process of simplifying some regulations and has announced that amendments to the Agricultural Produce Marketing Committee (APMC) Act will be prepared, thus allowing a direct connection between end buyers and producers.

“We have consulted with various stakeholders on the issue,’ said Public Works Department Minister Rai Kumar Chauhan, after a meeting with representatives from major mandis (large wholesale fruit and vegetable markets), some of which operate under his purview.

Currently, manufacturers cannot sell their products directly to retailers, as the transaction must go through so-called mandis. Sheila Dikshit, chairperson of the Agricultural Produce Marketing Committee, has strongly approved the decision that will allow FDI in multi-brand retail, and last week said the reform will be implemented in the city of Delhi by next fiscal year.

Some government officials have stated that the government will have to amend the APMC Act to break the monopoly of wholesale traders so that retailers can purchase products directly from farmers. Similarly, as with the Foreign Direct Investment policy approved by the Cabinet, the final authority for granting trade licenses remains with the states under their respective Shops and Establishment Acts.

To break the monopoly of Azadpur mandi, considered one of Asia's largest wholesale fruit and vegetable markets, the Government is also considering making privately owned farm produce available for sale. Sources suggest that the Government is thinking of building a wholesale market in the Tikri Khud area in West Delhi, where there is approximately 72 acres of land. Furthermore, it is rumored that the Government might even allow foreign retailers to set up shops in the area.

The states that have so far favored the recent reform are Maharashtra, Delhi, Jammu & Kashmir, Haryana, Rajasthan, Uttarakhand, Andhra Pradesh, and Assam. It is precisely in these states that there are as many as 19 cities (including Delhi, Mumbai, Pune, Nagpur, Jaipur, Hyderabad, Vijaywada, Srinagar, and Guwahati) with a population of over one million inhabitants, and based on the new FDI law, retailers will have the option to open stores only in cities with a population exceeding one million inhabitants.

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