As the Union Government is working towards releasing a discussion paper on FDI in retail trade, DIPP has initiated an exercise to amend the FDI policy for wholesale trading, also known as cash-&-carry trading. The move is aimed at sprucing up the country's distribution network and logistics, including cold chains for perishables in wholesale trading.

The FDI policy review for wholesale trading revolves around the 25 per cent cess imposed on sales to group companies, imposed through the guidelines which came into effect in April 2010.

In early 2010, the Union Ministry of Finance had proposed that trading between group companies should be allowed only to the tune of 25 per cent of the turnover of the company which had an FDI component. Since the ministry felt that the retail trading policy will be weakened in the absence of such a ceiling, it was incorporated in the guidelines for FDI in wholesale trade.

A number of multinational companies like Metro, Wal-Mart and Marubeni are engaged in wholesale trading operations in India.

FDI Clearances:

The government on 9 June 2010 on recommendations of the FIPB approved 17 FDI proposals worth Rs 569.41 crore, the bulk of which will go into media companies like Hindustan Media Ventures.

The major proposal was of Hindustan Media Ventures, the publisher of Hindi daily 'Hindustan', which envisaged foreign investment of Rs 350 crore. The proposed investment is expected to come from FIIs and venture capital funds.

The government also cleared Turmeric Vision's Rs 122.10 crore proposal for inducting foreign equity into its business of 'originating, aggregating, distributing and operating a 24-hour food television channel'.

The other proposals which were given a green signal by the government included Geomysore Services' Rs 36.76-crore plan to undertake minerals exploration, a Rs 19 crore proposal of C&J Clark International to set up a JV for retail trading of products under a single brand as well as Strawberry Constructions' proposal for Rs 25 crore FDI.

The June month also saw the government deferring 20 proposals and rejecting nine. The proposals which were deferred included the plans of Verizon Communications, NTT Communications, Arkadin SAS France, Essar Capital, S Tel, Telecordia Technologies, and Telstra (whose application was rejected earlier).

Decision on Verizon, S Tel, and Telecordia proposals were deferred earlier also over national security issues. In the case of US-based Verizon, for instance, FIPB wanted information on its Pakistan operations before clearing its proposal for transfer of equity shares.

The proposals of American Standard Bath & Kitchen (India), JT International India, General Nice Mineral Resources (India), UE Development India, Allied Moulded Products Inc and Sri Dudheshwar Nath Steel were also rejected.

Other Developments:

The government is mulling to do away with the ban on foreign mining companies having several JVs to mine the same mineral in the country.

Current regulations allow 100 per cent FDI in mining through the automatic route, but subject to Mines & Minerals (Development & Regulation) Act (MMDR), 1957, clearances and self-declaration about 'no existing JV' in the same field.

Under the proposed change, the DIPP will allow foreign miners to have any number of JVs in the country to mine the same mineral without taking permission from the FIPB.

The change is expected to pave the way for Rio Tinto to have multiple JV partners in different projects in India. The company has a JV with Orissa Mining Corporation and is considering many such JVs in India.

FDI Inflows:

In May 2010, the FDI inflows in India rose by 5.6 per cent to $2.21 billion (approx Rs 10,276.5 crore), thus showing a turnaround since the previous two months. The FDI inflows in May 2009 stood at $2.09 billion (approx Rs 9,718.5 crore).