New Delhi : The cabinet approved a probe on Thursday into lobbying efforts in India by Wal-Mart Stores Inc., acting on the same day that the commerce and industry minister assured the world’s largest retailer that India remains committed to keeping the doors open to foreign supermarket chains.
The terms of reference of the single-person committee that will conduct the probe include looking into disclosures by Wal-Mart before the US Senate regarding its “lobbying activities and details”. The panel will probe whether the retailer engaged in any activity in India in contravention of any local law “and any other matter relevant or incidental to the above”, a government statement said.
The committee will submit its report within three months, said the statement posted on the website of the Press Information Bureau. The statement did not name the person who will conduct the probe. Parliamentary affairs minister Kamal Nath had said in December that a retired judge will lead the probe.
Wal-Mart has disclosed it paid $25 million (around Rs.135 crore today) over four years to lobby US lawmakers to help it gain access to foreign markets, including India. While lobbying is legal in the US, it is illegal, but not entirely absent in India.
Opposition parties disrupted the winter session of Parliament last month over Wal-Mart’s disclosure and sought to discredit the government’s September decision to allow foreign multi-brand retail chains to open stores in India although both the company and the US state department clarified that the lobbying had been done with US lawmakers and confined to that nation.
Bharti Walmart Pvt. Ltd, a joint venture between the US retailer and Indian company Bharti Enterprises Ltd, which is currently engaged in a wholesale business, has since suspended five people, including its chief financial officer, as it investigates the issue.
E-mail queries sent to Wal-Mart remained unanswered. A spokesperson for Bharti Walmart had last month told Mint that the allegations were false. “The expenditures are a compilation of expenses associated with staff, association dues, consultants and contributions spent in the US,” he said.
Commerce minister Anand Sharma, meanwhile, met Wal-Mart’s chief executive officer Doug McMillon on the sidelines of the World Economic Forum in Davos, Switzerland.
McMillon told Sharma that Wal-Mart is “excited about India” and that it was currently studying the government’s multi-brand retail policy before making an announcement on entering the country, according to the commerce ministry.
Sharma, on his part, said India’s policy on allowing foreign direct investment (FDI) in multi-brand retail had a finality and Wal-Mart need not be concerned about any policy reversal. He also asked Wal-Mart to seek any clarification needed from his ministry. “All necessary clarity will be provided,” Sharma assured McMillon.
The government’s decision isn’t likely to lead to a drop in investor confidence, said Vinamra Shastri, partner and head (business advisory services) at Grant Thornton India Llp.
“It is good that the government is doing its due diligence and ensuring transparent practices,” Shastri said. “Policymakers are very clear about their stand on issues. Even prospective foreign retailers on their part know that India is a complicated market and they are doing their due diligence before entering the market.”
According to a corporate governance expert who didn’t want to be named, “At one level, you cannot say that lobbying per se is wrong, but when that is misused, it becomes an offence. If for a Wal-Mart, lobbying is permitted in their country and they are declaring it, (I) don’t know why it is such a sensitive issue. If you have a position and you want to achieve an end, one should be able to distinguish between the pros and cons of the ways used to attain it.”
The decision to allow 51% FDI in multi-brand retail was initially taken in November 2011. Resistance from some allies and opposition parties caused the government to defer its implementation. In September 2012, the government embarked on an economic reform push, allowing FDI in supermarkets and permitting foreign airlines to buy stakes in domestic carriers.
Wal-Mart has been the most active among foreign supermarket operators keen to enter India’s $450 billion retail market. Opponents say the entry of Wal-Mart and other overseas retailers will put millions of small Indian shop owners out of business.