Govt may allow FDI in multi-brand retailing

NEW DELHI: The government is looking at allowing foreign direct investment (FDI) in multi-brand retailing as part of a slew of measures to make India more attractive to overseas investors. 

Senior government officials told TOI that the thinking was that a gradual opening up would be a better strategy with global chains first allowed to open stores in metros, while wholesale cash-and-carry being limited to smaller towns and cities, at least for the moment. 

The move being piloted by the Department of Industrial Policy and Promotion is at the stage of discussion with political clearance yet to be accorded to the proposal. Once there is consensus on the issue within UPA, which is unlikely until elections in five states are over, states will need to be taken on board, a senior government official said. 

The Economic Survey, which was tabled in Parliament last month, had also suggested gradual opening up of the retail sector with the initial go-ahead limited to a few cities. 

At present, the government allows 51% FDI in wholesale cash-and-carry where global players such as Wal-Mart and Carrefour are only allowed to sell to bulk customers such as hotels, canteens and even local retailers. 

Officials said the move to open multi-brand retailing is part of the plan to "send the right signals to foreign investors", some of whom have chosen to stay on the sidelines since a string of scandals hit the headlines last year. 

By allowing greater FDI in some key sectors, the government will also be able to deal with the widening current account deficit. In fact, stepping up FDI was a key issue on the table of financial sector regulators — RBI, Sebi, Insurance Regulatory & Development Authority and the Pension Fund Regulatory & Development Authority — and finance ministry officials last week. The issue was discussed at the first meeting of the sub-committee of the Financial Stability and Development Council. 

Sources said by piloting the insurance and pension bills, the government would signal that it was still serious about reforms. 

There is also a move to amend the Factories Act and raise the FDI ceiling for defence production to 74% from 26%. 

While the Department of Industrial Policy and Promotion had floated consultation papers for allowing FDI in multi-brand retail and raising the cap for defence production, the government is yet to thrash out a consensus. 

The government's appetite for reforms is being driven by dwindling FDI flows. According to latest data, inflows declined 23% to $16 billion during April-December 2010, compared to nearly $21 billion in the same year ago period. 

The government's assessment is that some of the current account deficit would be trimmed once funds to set up the Posco steel plant in Orissa, an investment of $13 billion, starts flowing in. BP's proposal to acquire stake in Reliance's oil and gas blocks and the joint venture with the Mukesh Ambani-controlled company are also going to help FDI flows with around $14 billion.

Source: http://timesofindia.indiatimes.com/business/india-business/Govt-may-allow-FDI-in-multi-brand-retailing/articleshow/7667370.cms

Fresh ultimatum from Somali pirates

AMRITSAR: Somali pirates who had hijacked MV Suez, a ship of Red Sea Navigation , in the Gulf of Aden have given five days ultimatum for the life of six Indians and four Pakistani if they didn't get $ 2.3 million, informed United Nations Expert Advisor on Human Rights, Ansar Burney who claims to be in touch with the pirates for the release of the hostages. 

While talking to TOI over phone from Karachi on Tuesday, Burney said that he was negotiating with the Somali pirates on humanitarian grounds for the greater interest of human dignity and to save the lives of six Indians and 4 Pakistanis. The pirates had earlier demanded $5 million for the release of hostages, he added. 

MV Suez with the flag of Panama was hijacked by the Somali pirates in the Gulf of Aden on August 2, 2010, with 6 Indians, 4 Pakistani, 4 Lankans and 11 Egyptians on board, said Burney. 

Pakistan's former Federal Minister for Human Rights and Chairman of the Ansar Burney Trust International, Burney, said that the condition of the hostages was critical as they had been sailing in the Somali sea for past nearly eight months ."They were being given some boiled rice and fish by their captors", he said. 

"They established contact with me on Tuesday and gave ultimatum for the hostages life if their demand was not met" said Burney, adding that earlier he had contacted them on Saturday for the release of crew members. 

Read more: Fresh ultimatum from Somali pirates - The Times of India http://timesofindia.indiatimes.com/india/Fresh-ultimatum-from-Somali-pirates/articleshow/7601127.cms#ixzz1FLYtLaTc

Consumer durables may become costlier

MUMBAI: Consumers may have to shell out more on electronics, appliances and fast moving goods. Talks of a rollback of the stimulus and increase in excise duty are making consumer goods' companies apprehensive. Already reeling under the surge in input costs over the year, companies will be forced to pass the excise duty burden, leading to higher retail prices for consumers. It looks almost certain that excise will be hiked in the auto sector, experts say. 

Durable and electronic companies like Samsung and LG India say the move will hit growth of the industry, while FMCG firms, including beverage companies feel that the move will squeeze their profitability and impact margins. 

"There is speculation that the duty benefit given earlier may be rolled back, which will lead to a 2% increase in the excise levy. We hope this does not happen. The move will be detrimental, and pull down growth," a top executive with a consumer durable company told TOI. Recently, speculation about the increase has been rife, with the PMEAC also making a strong case for the stimulus withdrawal in view of the robust growth in the economy. 

The stimulus and tax cuts given to the industry in 2009 had provided a fillip to the sagging economy, with the consumer durable industry growing at strong double digit in 2010. Flat panel TVs grew 80%, while refrigerators, air-conditioners and washing machines showed a 12.5%, 44% and 10% growth respectively, during January-December 2010. The industry has been suffering due to hike in metal prices with the increase in copper at 45%, steel 16%, resins 18% and aluminium 23% over August last year. 

"At a time when the industry is reeling under the impact of rising input costs, one is looking at support from the government by way of policies that will boost domestic manufacturing ," R Zutshi, deputy MD, Samsung India. 

Consumer goods, including durable firms, have implemented price hikes across the board over the last few months up to 10-15%. Says LG India COO YV Verma: "Such a move will adversely impact the industry, already suffering with high costs". The upped tags will be bad news for consumers, who are already burdened by a surge in food inflation even as their overall expenses have shot up. 

"If the budget announces an increase in duties it will affect the end consumer who is already stretched as far his budgets go. There has to be some caution exercised by the government to curb further price hikes," said KK Modi, chairman, Godfrey Phillips India. The group, which has interests in diverse businesses such as confectionery, cosmetics and tea along with its mainstay tobacco, "hopes that there no excise duty increases for tobacco." Cigarette prices have gone up by about 25% in the last one year. 

The $2-billion soft-drinks market, largely comprising the two cola majors-PepsiCo and Coca-Cola-is also expected to be hit with the rise in excise duty. At present, the levy at about 8%, if rolled back, along with other increases in manufacturing costs, will hurt their bottom lines. Also, FMCG companies which have facilities located outside of excise duty-free zones, will be impacted. Says Siddhartha Sanyal, chief India economist, Barclays Capital: "A small hike in excise duties cannot be ruled out as the government is trying to boost revenue collection and the current excise rates are still below the pre-stimulus levels for a number of industries." 

Source:-http://timesofindia.indiatimes.com/business/india-business/Consumer-durables-may-become-costlier/articleshow/7551815.cms