Retail FDI policy may not have clear impact on MSMEs: Panel

A Parliamentary panel has warned that the Foreign Direct Investment (FDI) policy for retail may not have positive impact on micro, small and medium enterprises (MSMEs) and has suggested that a regulatory authority be set up to safeguard the interest of domestic players in the sector, reports media.

"The committee is of the opinion that the FDI for retail may not have beneficial impact on the MSME sector... It is of the view that not enough safeguards have been provided for to insulate the SME sector from sudden changes in trade policy," said the report, tabled in the Parliament.

The Parliamentary Standing Committee on Industry, headed by Tiruchi Siva, DMK leader, said that the MSME Ministry should commission a survey to assess the benefits and losses of previous FDI policies on the sector.

"...the committee feels that FDI in retail may not benefit the retail sector unless designing, packaging, bar coding, skill development are improved upon and integrated into supply chain." it said.

It also said that the implementation of policy provision should be closely monitored through an institutional mechanism in the initial years, and not left to self-certification.

The committee suggested that the auditor should specifically certify the adherence to the 30 percent sourcing norm and it must be mentioned in the audited report of the companies which would invest under FDI in retail scheme.

"The committee recommends that 30 percent sourcing norm should be applicable item wise. The committee emphasises the need for setting up an institutional mechanism like a Retail Regulatory Authority," it said.

It has also raised serious reservations over the prescribed self certification norms. It said that auditors must specifically certify the adherence of sourcing norms by the retail companies.

"...MSME ministry should conduct regular survey of MSMEs to monitor sickness/takeover/mergers and other trends," it said, adding that continued dominance of big foreign retail giants and their direct dealings with farmers by giving attractive prices in the beginning will cripple mandis and markets which form part of rural economy.

"Once such mandis are eliminated the big foreign retail giants will manipulate prices and our farmers would be forced to sell their products at allow price dictated by them.

"Our own squeezed out retailers and all those associated with the markets and retail trade would lose their livelihood and become jobless," it added.

It cautioned against dilution of sourcing norms and said that without efficient regulatory frame work, this policy would not give intended benefits to MSME sector and instead it may imperil its very survival.

Further, it said, national board on MSME must take up the issue of impact of FTAs, trade policy and FDI on the sector.