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

After the recent reform, Delhi will become the leading city in India capable of attracting FDI in multi-brand retail. Precisely in order to boost 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 enabling 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 of the major mandis (large wholesale fruit and vegetable markets), the operation of some of which takes place under his control.

Currently, producers cannot sell their products directly to retailers, as the exchange must go through so-called mandis. Sheila Dikshit, chairperson of the Agricultural Produce Marketing Committee, has strongly endorsed the decision that will allow FDI access 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 said the government will have to make changes to the APMC law to break the monopoly of wholesale traders so that retailers can buy products directly from farmers. Just as with the Foreign Direct Investment policy approved by the Cabinet, the final authority for business licensing remains with the states under their respective Shops and Establishment Acts.

To break the monopoly of the Azadpur mandi, which is considered one of the largest wholesale markets for fruits and vegetables in Asia, the government is also considering marketing the produce that occurs in privately owned fields. Some sources say that the government is considering building a wholesale market in the Tikri Khud area, located in West Delhi, where there are approximately 72acres of land; in addition, it appears that the government may even allow foreign retailers to set up stores in the area.

The states so far in favor of the recent reform are Maharashtra, Delhi, Jammu & Kashmir, Haryana, Rajasthan, Uttarakhand, Andhra Pradesh, and Assam. Just in these states there are as many as 19 cities (including Delhi, Mumbai, Pune, Nagpur, Jaipur, Hyderabad, Vijaywada, Srinagar, and Guwahati) with a population of more than one million, and under the new FDI law, retailers will only be allowed to open stores in cities with a population of more than one million.

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