India Development News & Foreign Investment Opportunities

Retail: 50% of US$100m must be in back-end infrastructure

Investment must be in network


Investment must be in network



At least 50% of total Foreign Direct Investment (FDI) brought in the first tranche of US$100 million, shall be invested in ‘back-end infrastructure’ within three years, Commerce and Industry Minister Piyush Goyal said in a written reply in the Lok Sabha on 10 July 2019.

The ‘back-end infrastructure’ will include capital expenditure on all activities, excluding that on front-end units.

The back-end infrastructure will include investment made towards processing, manufacturing, distribution, design improvement, quality control, packaging, logistics, storage, warehouse and agriculture market produce infrastructure, he elaborated.

Expenditure on land cost and rentals, if any, will not be counted for purposes of backend infrastructure, he added.

He gave details:

Subsequent investment in backend infrastructure would be made by the Multi-Brand Retail Trading (MBRT) retailer as needed, depending upon its business requirements.

At least 30% of the value of procurement of manufactured and processed products purchased shall be sourced from Indian micro, small and medium industries, which have a total investment in plant & machinery not exceeding US$2 million.

This valuation refers to the value at the time of installation, without providing for depreciation. The ‘small industry’ status would be reckoned only at the time of first engagement with the retailer, and such industry shall continue to qualify as a ‘small industry’ for this purpose, even if it outgrows the said investment of US$2.00 million during the course of its relationship with the said retailer.

Sourcing from agricultural co-operatives and farmers’ co-operatives would also be considered in this category. The procurement requirement would have to be met, in the first instance, as an average of five years’ total value of the manufactured/processed products purchased, beginning 1st April of the year during which the first tranche of FDI is received. Thereafter, it would have to be met on an annual basis.

Retail sales outlets may be set up only in cities with a population of more than 10 lakh as per 2011 Census or any other cities as per the decision of the respective State Governments, and may also cover an area of 10 kms around the municipal/urban agglomeration limits of such cities; retail locations will be restricted to conforming areas as per the Master/Zonal Plans of the concerned cities and provision will be made for requisite facilities such as transport connectivity and parking.

The Government will have the first right to procurement of agricultural products.

The above policy is an enabling policy only and the State Governments and Union Territories would be free to take their own decisions in regard to implementation of the policy.

Therefore, retail sales outlets may be set up in those States/Union Territories which have agreed, or agree in future, to allow FDI in MBRT under this policy.

Retail trading, in any form, by means of e-commerce, would not be permissible, for companies with FDI, engaged in the activity of multi-brand retail trading.

Overall, minimum amount to be brought in, as FDI, by the foreign investor, would be US$100 million.

FDI in multi brand retail trading, in all products, will be permitted, subject to the following conditions – Fresh agricultural produce, including fruits, vegetables, flowers, grains, pulses, fresh poultry, fishery and meat products, may be unbranded.

The Multi Brand Retail Trading will be 51% equity through Government route.

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