Indian States are Putting More Roadblocks in front of Walmart Expansion

New Orleans   Two reports yesterday from Dharmendra Kumar, director of the India FDI Watch Campaign affiliated with ACORN International, point out how far the superstore giants like Walmart, Carrefour, Tesco, and Metro really are from being able to freely enter markets throughout India.  This is largely a story that the global business press is missing as they tout the rise and fall of the stock market without trying to understand that there continues to be a huge struggle over these issues of foreign direct investment in multi-brand retail.

            First and foremost, when Prime Minister Singh announced that he was pushing forward the modification, he could only do so generally at the parliamentary level.  Specifically each of the twenty-eight India states, not to mention the seven territories, has the right to independently decide whether to allow this FDI expansion in their jurisdictions.  As of this date, only 11 of the 28 states have indicated a willingness to tolerate such expansion with 17 thus far militantly opposed.

            As Dharmendra reported yesterday, there continue to be more roadblocks. 

            Walmart had teamed up with India-based Bharti in recent years to operate a “cash-and-carry” business that sold only to other businesses and not the general public, something like Sam’s Clubs the United States.  The Government had indicated that a “group” business like Walmart-Bharti had certain restrictions, but in recent years the ambiguity of the “group” business definition had allowed them free rein.  No more. 

            To quote from Dharmendra’s report:

On 3rd June 2013, Govt. of India defined Group firms as two or more enterprises that directly or indirectly are in a position to exercise 26% or more voting rights in the other enterprise or appoint more than 50% members on board of directors in the other enterprise. Amidst widespread opposition to the Walmart’s backdoor entry of FDI in Multibrand retail (through Bharti-Walmart, the 50:50 joint venture between Walmart and Bharti for operating Cash-and-carry outlets in India), in April 2010 Govt. of India framed a policy that asked cash-and-carry businesses (Bharti-Walmart) to limit their sale to group firms at 25 per cent of their turnover. In absence of clear definition of what group firms meant Bharti-Walmart’s cash & carry business (20 Best Price Stores) continued to sale almost 85% of their products to Bharti Retail’s 200 Easy Day stores.

Now, Bharti-Walmart will either have to limit its sale to Easy Day to 25 per cent of its turnover or restructure its corporate structure.

 

There can’t be happiness in Bentonville over this new clarification.

 

Yesterday the Indian Department of Industrial Policy and Promotion (DIPP) was also meeting and was expected to also propose additional heartburn for the superstore outfits.   India FDI Watch expected the following actions:

It is likely that the DIPP

 

– Would ask global superstores to invest 50% of only the first tranche of investments (minimum $100 million) in back-end infrastructure.

– Would declare that the 51% foreign direct investment limit in multi brand retail is composite one, including FDI and foreign institutional investment (FII).

– Would allow superstores to create back-end infrastructure in states that do not allow any FDI in multi-brand retail

             Forcing the big boys to put their investments up front rather than only in the logistics and supply at the backend of a retail operation almost puts a bull’s-eye specifically on the usually smiley-face of Walmart.

            There’s a lot more fight to come in India over FDI’s expansion into retail.

Indian States and Walmart Expansion Audio Blog

Facebooktwittergoogle_plusredditpinterestlinkedinmail

Foreign Direct Investment for Walmart and Friends Coming to Critical Vote in India

protest against foreign retail gaints in India earlier this year

Quito   Though I could find no information in the US-based press, the stalemate in the Parliament in India was finally broken yesterday after a week long stalemate centered on the parliamentarians’ opposition to the Government’s action to unilaterally modify foreign direct investment restrictions in multi-brand retail, allowing Walmart and other big box operations to enter India on their own steam potentially.  The India FDI Watch Campaign, supported by ACORN International since its inception, has been deeply embedded in this effort.   ACORN’s FDI campaign director in Delhi, Dharmendra Kumar, filed this report with me last night on the evolving situation and the potential vote breakdown.  Needless to say, it’s very, very close with street protests also planned within days!

Govt. strength over FDI in retail issue will be on trial in Parliament next week, with the Lok Sabha (Lower House) deciding to have a discussion on December 4 and 5 on the issue under rule 184 that entails voting. “I have received 30 notices for discussion on FDI in multi—brand retail under Rule 184. “I have admitted the motion to allow the discussion,” the Speaker Meira Kumar said. Rajya Sabha (Upper House) will also have a similar discussion, the date and timings for it will be decided later. The nearly week-long deadlock gripping the Lok Sabha as well as the Rajya Sabha (Upper House) over the issue of allowing foreign superstores is thus broken with the government conceding the Opposition’s stringent demand for a debate on the issue in both Houses of Parliament under rules that entail voting.

While the Govt. is confident of required votes in the Lok Sabha, the Opposition is hopeful of defeating the Govt. in the Upper House. Govt. is sounding confident after its second largest constituent, DMK reluctantly decided to vote for the Govt. “with bitterness” on this issue. The Govt. is also hoping its key allies SP and BSP who stand opposed to foreign superstores will bail it out through abstention from voting. Though SP and BSP continue to give mix signals and are keeping everyone guessing. To muster a simple majority mark in the Rajya Sabha, the Govt. requires votes from the 15-member BSP and abstention by 9 SP parliamentarians.

The likely parliamentary position is as follows:-

Lok Sabha Position

For FDI Retail-257

Undecided-43 (In principle all opposed to FDI Retail)

Against FDI Retail-244

Simple majority mark-272

Total Seats-545

Effective Strength-544

Rajya Sabha Position

For FDI Retail-95

Undecided-24 (In principle all opposed to FDI Retail)

Against FDI Retail-113

Nominated Members-12

Simple majority mark-123

Total Seats-245

Effective Strength-244

This will be the first such trial of strength in the 15th Parliament.  There has never been a parliamentary discussion of this sort on executive decision.

Another opportunity-The Opposition could get another opportunity to show its strength when the government later brings RBI’s amendments to Fema in the form of Fema (Third Amendment) Regulations, 2012 notification for the approval of both Houses to facilitate FDI-retail’s implementation.

Street Action-Independent retailers and street vendors would organize protest against FDI Retail at parliament on 3rd December.

 

Facebooktwittergoogle_plusredditpinterestlinkedinmail