The Government of India has found ‘no fault,’ with the tie up between telecom major Bharti and the world’s biggest retailer Wal-Mart, announced earlier on 28th November, 2006, reports PTI. The Government, in the teeth of opposition from the left lobby, was forced to agree to examine contours of this retail alliance within the framework of existing FDI policy guidelines on retail.
The government in the previous year (10th February, 2006) had put the FDI in wholesale ‘cash and carry’ on the automatic route. As such, Bharti-Wal-Mart alliance, which envisages 100% ownership of Bharti Enterprises, a local entity, in front-end retail, has been found to be in conformity of the existing policy on FDI in retail, said high-level sources in the Ministry of Commerce and Industry.
While, Bharti will wholly own the front-end, back-end of the retail alliance, involving logistics, cold chain and supply chain management, according to the announcements made so far by Bharti, will be jointly managed by the two partners. Wal-Mart is also expected to operate cash and carry business based on the Sam’s Club model.
Currently, ‘Metro Cash & Carry’ of Germany and ‘Shoprite’ of South Africa have set up 100% owned wholesale retail operations in India.
This clearance of the government, also paves way for the world’s second and third biggest retail players, Carrefour of France and Tesco of the U. K. respectively, and indeed many more like them, to set shop in India with active participation of a local partner.
Tesco, with whom talks with Bharti failed on account of differences between the two on the pace of joint retail roll out in India is said to be in talks with Tatas now for its foray into India. Tatas themselves may perhaps prefer a slower roll out than Bhartis, in tune with the wishes of Tesco.
Carrefour has also withdrawn from talks for a possible alliance with Lifestyle of Dubai and may, perhaps, now be exploring possibilities with Birlas or even Biyanis, although, both of whom like Reliance Retail have announced their intentions to go alone.
In any case, this removes major hurdle for entry of big ticket, multi-brand, retailers in India. All major retailers are eyeing at India as it is not only the fastest growing but also the second most populous retail market in the world. This becomes more critical when there is hardly any growth in developed markets of the world.
Of course, players like Hutchison Whampa of Hong Kong who are looking for majority ownership stake in the multibrand, front-end may have to wait for some more time. In any case, this is more a matter of formality as the savvy retailers have already found an effective hole in the policy and, notwithstanding the noises being made by the left parties, the government is willing to look the other way.