SET FLOOR SPACE NORM FOR RETAIL FDI

Posted By Dr. Vishesh Rawat

Bharti Enterprises will invest $2 billion (around Rs 10,000 crore) and employ 60,000 people in their retail sector units by 2016.
It will also open 6-10 cash-and-carry outlets in the coming two years including a new one by December, the company’s Vice-Chairman and Managing Director, Rajan Bharti Mittal, said.
Mittal, leading the retail, cash and carry and realty business of the Bharti Group, said Bharti would start 70 retail stores by December.
Though Bharti has interests in realty, Mittal said, “Our retail units won’t depend entirely on our realty operations for commercial space. We will also partner other realty firms for our retail ventures.”
Mittal, currently the Senior Vice-President of FICCI and former Chairman of FICCI’s Retail Committee, told Business Line recently in an exclusive interview in Istanbul that instead of placing a blanket ban on organised and multi-brand retail, if the Government wants, it can put a minimum shop area ceiling of 2,000 sq ft for big companies entering modern organised multi-brand retailing.
The Government can also frame rules that Foreign Direct Investment in multi-brand will not be allowed for retailers operating from less than 2,000 sq ft units, he said, adding this will ensure that operations of big players do not in any manner overlap with that of small ‘kirana’ stores.
“But it is not right to totally ban FDI in multi-brand retail. There are big chains like Carrefour in countries with no FDI curbs, but in those places there are small retailers too,” Mittal said.
The Government, however, is going slow on permitting FDI in multi-brand retail owing to political sensitivities. However, FDI of up to 51 per cent is allowed in single-brand retail. Recently, a Parliamentary Standing Committee had mooted a ban on FDI in retail. The committee also said entry of big Indian firms and MNCs in retail would force small stores (numbering over a crore) to close shop, that would, in turn, result in unemployment.
Claiming that there was no overlap in operations of big retailers and that of small stores, Mittal said while a ‘kirana’ store operates from a 500-800 sq ft area shop with around 500-600 SKUs (stock keeping units), big retailers are looking at shops where each would have over 2000 sq ft in area holding about 3000 SKUs. Sourcing hub
Opening the retail sector would make India a major sourcing hub for retail biggies such as Wal-Mart, he said. Currently, while the American giant buys $20 billion worth goods from China every year, it sources items only amounting $600 million annually from India. Besides, SMEs and farmers selling their goods to big retailers would get a better price, in turn strengthening India’s manufacturing and farm sectors, he said, adding that big retailers will also ensure better cold chain facilities.
Also, consumers get cheaper and good quality items in big stores. ‘Kirana’ stores can cut costs, because instead of going to about 30 distributors to source their 500-700 items, they can get quality items from any one cash-and-carry outlet at a cheaper rate.