Now, Rajasthan says no to retail FDI

Within a month of the Aam Aadmi Party (AAP)-led government in Delhi withdrawing approval to foreign direct investment (FDI) in multi-brand retailing, Bharatiya Janata Party (BJP)-ruled Rajasthan has likewise reversed the state's official position on the matter.

The Department of Industrial Policy and Promotion (DIIP) is in the process of referring Delhi's volte face to the law ministry. It may do the same in the case of Rajasthan, said an official.

Following the Delhi government's letter to DIPP, opposing retail FDI, commerce and industry minister Anand Sharma had said the policy was not a "revolving door". According to Sharma, governments were given the option to join FDI in multi-brand retail, but there was no exit route. The minister had also argued that policy instability would confuse foreign investors.

Before the Assembly elections in December 2013, both Delhi and Rajasthan were ruled by the Congress. The two governments had backed foreign investors in retail.

A commerce ministry official confirmed that Rajasthan chief minister Vasundhara Raje had sent out a letter to Sharma, stating that her government was opposed to allowing foreign retail chains in the state. A Rajasthan minister said it was already known that BJP was opposed to FDI in multi-brand retail.

Delhi and Rajasthan are among the attractive destinations for foreign supermarkets.

Constitution expert Subhash Kashyap had pointed out that the Delhi's status is between a state and a centrally-administered entity. "So, if there's a conflict between the Union government and the Delhi government, even if the matter pertains to the state list, Union law will prevail," he said. However, in the case of states, state law will prevail in a similar situation.

In September 2012, the Union Cabinet had cleared up to 51 per cent foreign investment in multi-brand retail, while giving states the power to decide if an international chain could open stores there or not. Out of the 12 states and Union territories which had supported retail FDI earlier, two have reversed their stand. Karnataka joined in later when Congress formed the government in the state last year.

Many states in favour of retail FDI are poll-bound this year. These include Andhra Pradesh, Maharashtra and Haryana.

Also supporting FDI in this segment are Manipur, Assam, Karnataka, Himachal Pradesh, Uttarakhand, Jammu & Kashmir, Daman & Diu, Dadra and Nagar Haveli.

Recently, UK-based Tesco became the first international chain to enter the multi-brand space, with a Rs 680-crore proposal. Tesco, in partnership with Tata group's Trent, will open stores only in Karnataka and Maharashtra, both ruled by the Congress.

Various political parties including the BJP, the Dravida Munnetra Kazhagam, the Trinamool Congress, the Samajwadi Party and AAP are opposed to retail FDI.