Agra: Overseas supermarket companies intending to establish a presence in India are free to source items from any region of the country, irrespective of where they open their stores, trade minister Anand Sharma said on Tuesday.
“There is no area restriction on sourcing. It depends on the logistics of the company and will be the company’s own decision,” Sharma told reporters at the partnership summit organized by the commerce ministry and the Confederation of Indian Industry (CII) lobby group.
Sharma had met top officials of Wal-Mart Stores Inc. and Tesco last week on the sidelines of the World Economic Forum at Davos, Switzerland.
Officials of both the companies had sought more clarity on the various aspects of the multibrand retail policy.
The minister said this included questions about where goods could be bought from.
The decision to allow 51% foreign direct investment (FDI) in supermarkets was taken in November 2011. Resistance from some allies and opposition parties forced the government to defer its implementation.
In September 2012, the government eventually allowed FDI in supermarkets while allowing individual states to decide whether they wanted them or not.
Sharma said so far 11 states are open to such stores. While the Trinamool Congress led by West Bengal chief minister Mamata Banerjee withdrew support to the central government over the issue, Bharatiya Janata Party-led states, as well as Uttar Pradesh and Orissa, have also refused to allow foreign supermarket stores.
However, when asked whether he tried to address the concerns of the Uttar Pradesh government about allowing such supermarket stores in the state, Sharma said he had not come to the state to discuss central policies.
“UP as a state has the right to make its own choice like any other state, one way or the other,” he said.
Though states such as Delhi and Haryana are inclined to allow such stores, there had been no clarity thus far on whether the chains located there could source farm and non-farm products from states that are against FDI in multibrand retail.
Sharma said since 100% FDI is allowed in creating back-end sourcing infrastructure, this should be understood to have been allowed by the government.
However, Arpita Mukherjee, professor at the Indian Council for Research on International Economic Relations, said the bigger concern for foreign supermarket stores is the clause on 30% sourcing from small and medium enterprises (SMEs).
“Once a large supermarket chain starts sourcing from an SME, it may outgrow the definition of SME in due time as it gets integrated into the global supply chain. There is no clarity whether in such cases the supermarket player should stop sourcing from such SMEs,” she said. Indian laws currently define SMEs as companies that have invested $1 million or less in plant and machinery.
Asit Ranjan Mishra is attending the CII Partnership Summit 2013 as a guest of CII.