The government's proposal to allow foreigners to retail food products has been caught in interministerial differences on whether conditions need to be imposed for such investments and market access. Finance minister Arun Jaitley had in the budget for the current fiscal announced that 100% FDI would be allowed through the approval route in marketing of food products produced and manufactured in India which will benefit farmers, give momentum to food processing industry and also create vast employment opportunities. The government wants to open up retail of food products to boost the farming and rural economy.
Department of Industrial Policy and Promotion (DIPP) and the finance ministry are not keen on sectoral conditions, which are difficult to monitor and often act as a deterrent. A formal note has been moved by the DIPP that will be taken up by the Cabinet once these differences are resolved.
The food ministry is however keen on imposing conditions on the lines of those for multi-brand retail as it faces various conditions including mandatory 30% sourcing from local micro, small and medium industries. Further, the multi-brand retail sector, which is open for up to 49% FDI, has conditions including opening up of retail outlets only in cities with a population of more than 10 lakh as per 2011Census, 50% of total FDI be brought in the first tranche with a minimum capital of $100 million and mandatory sourcing.
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