FDI IN RETAIL: No escape route available with government

New Delhi, October 31, 2012:  The Government of India has been bound by the Foreign Exchange Management Act, 1999 (FEMA) to face willingly or unwillingly both the houses of Parliament on the issue of FDI in Multi Brand Retail, in its forthcoming session.

Stating this at a press conference here today, Praveen Khandelwal, Secretary General of the Confederation of All India Traders (CAIT), added majority of political parties are demanding a discussion on its decision of allowing FDI in retail and the government is avoiding discussing the issue in Parliament on the pretext that notification of allowing FDI in retail is an executive decision which need not to have approval of the Parliament.

Adding, he said but now, there is no escape route available with the government but to go to Parliament to place any amendment in rules and regulations of FEMA made by the Reserve Bank of India in both the houses of Parliament which have the powers to agree, disagree or seek modification in the amendment.

Naresh Sirohi, General Secretary, Bhartiya Kisan Morcha, Pradeep Sharma, Coordinator, Khudra FDI Virodhi Rashtriya Morcha, Saudan Singh and R. B. Singh Rajput of National Hawkers Federation, CAIT Delhi State President Narender Madan, National Secretary Ramesh Khanna, CAIT Delhi State Secretary General Vijay Pal, Anil Gupta, Convener, Bhariya Vitt Salahakar Samiti, Ved Prakash Gupta, Convenor, MSME of the Morcha and other senior trade leaders were also present at the press conference.

CAIT National President B. C. Bhartia said that The Foreign Exchange Management Act, 1999 (FEMA) was enacted with the object of facilitating external trade and payment and for promoting the orderly development and maintenance of foreign exchange market in India. It extends to whole of India. He further said that under this section 6 (3) of FEMA empowers the Reserve Bank to issue, modify or amend any rules or regulations pertaining to Foreign Direct Investment in India.

Adding, he said in exercise of the powers conferred by clause (3) of article 77 of the Constitution, for the allocation of the business of the Government of India, the Government of India (Allocation of Business) Rules, 1961 have been framed. As per these Rules the business of the Government of India is allocated to Cabinet Secretariat and deemed to have been, allotted to the Prime Minister. The President may, on the advice of the Prime Minister, allocate the business of the Government of India among Ministers by assigning one or more departments to the charge of a Minister.

The Department of Industrial Policy and Promotion in the Ministry of Commerce is allocated the business of direct foreign and non-resident investment in industrial and service projects excluding functions entrusted to the Ministry of Overseas Indian Affairs. The DIPP can only deal with policy matters relating to foreign direct investments in industrial and service projects including multi brand retail trade as the legal provisions for carrying out such activities in India are governed by FEMA and that can only be amended as provided in FEMA.

In the present set up the logical sequence of permitting FDI in multi brand retail trade is (a) Policy decision by DIPP (b) Amendments in Regulation governing FDI by RBI (c) Approval of both Houses of Parliament of amendment in Regulation framed under FEMA in terms of section 48 of the Act.

Both Bhartia and Khandelwal said that it is very clear from the above that though DIPP has taken a policy decision to allow FDI in multi brand retail trade but it can only be implemented after the next two processes are completed that is amendment in Regulations by RBI and approval of the amendment of Regulations by both the houses of Parliament.

The CAIT has appealed the Reserve Bank of India and Government of India that before presenting the same to Parliament, wide publicity of the amendment in regulations to allow FDI in Multi Brand Retail so that the stakeholders can convey their views to Members of Parliament. 

In the meanwhile, the CAIT has decided to meet Leader of Opposition in both houses of the Parliament and senior leaders of all national and regional political parties to apprise them of the factual position so that a structured debate can be held on the issue as and when it is presented in Parliament in its forthcoming session by the Government. A CAIT delegation will also meet UPA Chairperson Sonia Gandhi to apprise her about the concerns of the stakeholders which has been ignored by the government.