IKEA coming to India with Indian flavours

Restaurant body NRAI ( National Restaurant Association of India) has asked the government to clarify whether online food aggregators like Zomato, Swiggy and UberEats are covered by the policy on foreign direct investment (FDI) in ecommerce.

NRAI, earlier this month had asked the Department of Industrial Policy and Promotion (DIPP if online food players should comply with the guidelines, which prohibit them from influencing prices and operating inventory-based models, including their own kitchens.

“As the restaurant sector comprises lakhs of small businesses run by entrepreneurs and families, their interests need to be kept in mind. The policy should provide a fair and non-discriminatory framework,” shared Rahul Singh, President, adding that in this rush to acquire customers at any cost and intense competition between the ecommerce behemoths, we need to prevent any adversities on the brick-and-mortar players.

The norms issued by the DIPP at the end of December to provide clarity on the FDI policy are due to come into effect on February 1.

According to the DIPP guidelines, 100% FDI is allowed in ecommerce marketplaces, which are platforms for buyers and sellers. FDI is not allowed in inventory-based models, where an entity can own the goods and services and sell them directly to consumers.

According to an amendment dated November 18, 2018, by the Food Safety and Standards Authority of India, the regulator, ecommerce food business operators are also classified into these two categories — inventory-based and marketplaces.

Formed for the e-commerce sector, the Government's revised FDI guidelines offer support to traditional businesses posing a threat to food retail giants.

The US-based online retail company Amazon has decided to discontinue selling food on its website which will be effective from February 1, 2019.

Amazon was the only foreign retailer pledging investment in the food retail business that amounted up to USD 500 million. The new guidelines pose as an obstacle to this as well as affects Amazon's decision to buy a stake in Future Retail.

The company had planned to acquire a 9.5 per cent stake in Future Retail owned by Kishore Biyani but according to the new guidelines, that won't be possible as the group is a seller on the Amazon website.

Speaking about the development, one of the people having direct knowledge said, “Amazon Retail India Pvt Ltd (ARIPL), which is a seller of foodstuff on Amazon.in, will stop selling post-February 1 in a bid to comply with the new marketplace regulations.”

“We remain committed to invest in India in a way that can work with the government’s vision towards the farmer and agricultural community but at present, we are still evaluating the Press Note 2 guidelines,” added the seller.

Speaking on this matter, Commerce Minister Suresh Prabhu said, “We support FDI entering India. We recorded a total of $61.85 billion of FDI and we are now targeting $100 billion, and to achieve this we have prepared a plan which will help the company to invest. We will also have to assure all the foreign investors and domestic investors that we will continue to have a stable and transparent policy.”

Several industry experts believe that these new rules will protect the interests of traditional businesses as several of these companies had complained of huge losses due to these e-commerce giants.

Source: Economic Times

Harsimrat Kaur Badal, the Food Processing Minister, has said that the foreign direct investment (FDI) in the food processing sector has already touched the $1-billion mark so far this year.

Badal said, "When we took over the government in 2014, FDI in the food processing sector used to be USD 500 million every year. This year, we touched USD 1-billion mark. This is a tip of the iceberg, we have to go a long way."

In 2017-2018, FDI in the food processing sector was $904.9 million. While, in 2016-17, 2015-16 and 2014-15, it stood at $727.22 million, $505.88 million and $15.86 million, respectively.

The minister said that the FDI in multi-brand retail was allowed keeping in mind the need to boost food processing level and provide an alternative market to farmers to sell their produce.

"I am happy to see companies like Metro and Walmart are keen to tie up directly with farmers," she said.

Ashok Dalwai, CEO of National Rainfed Area Authority (NREA), said, "We have seen that the captive investment in agriculture, which is pre-requisite for any kind of accelerated growth, has not really happened through the corporate sector."

"Agriculture, which is the primary economic activity and in a way it is the economic sector which generates the demand for services and industry sectors, was not subjected to the liberalisation. But in the last four years, the emphasise has been on bringing in reforms in the sector and make it a private sector enterprise," Dalwai further added.

The foreign direct investment (FDI) in the food processing sector rose 24 per cent in 2017-18 to USD 904.9 million, according to an official data. FDI inflow into the sector stood at USD 727.22 million during 2016-17 financial year.

The sector attracted FDI worth USD 505.88 million and USD 515.86 million in 2015-16 and 2014-15 respectively, the data showed.

The government had in July last approved American e-commerce major Amazon's proposed USD 500 million investment in retailing of food products in India.

At present, 100 per cent FDI in food processing sector is allowed through automatic route. In 2016, the Centre allowed 100 per cent FDI through approval route for retail trading, including through e-commerce, in respect of food products manufactured and produced in India.

Food Processing Minister Harsimrat Kaur Badal had in February this year said FDI in the sector could touch USD 1 billion in 2017-18.

The sector would attract an investment of USD 14 billion over the next 2-3 years as committed by the domestic and foreign investors during the world food summit, she had said.

The World Food India 2017, organised by the ministry, attracted participation from 61 countries, 60 Global CEOs and more than 200 global companies.

Harsimrat Kaur Badal, Union Food Processing Minister, has taken up with the finance ministry the issue of high GST rate proposed on some products like pickles, murabba and papad and sought a review of the same.

The minister has also forwarded Coca-Cola India's demand not to include fizzy drinks in the 'sin' category under the Goods and Services Tax (GST) to be rolled out from July 1.

Badal said, "Higher GST rate has been proposed for two-three categories of food items such as pickles, murabba and papad. The industry has made representation, which has been forwarded to the finance minister. It will study and take a call."

She said, "Coca-Cola India has demanded not to include fizzy drinks in sin category.The company is okay with higher tax but asking not to include the product in the sin category along with tobacco and alcohol. I have communicated this to the finance minister."

She further added, "The government has taken various initiatives in the last three years including setting up of mega food parks and cold chains as well as allowing 100 per cent FDI in the marketing of food products manufactured and produced in India.

According to Badal, the government has recently approved Rs 6,000 crore scheme called 'Sampada' which includes existing schemes like mega food parks and some new programmes.

The government is identifying agro-clusters across the country where food processing facilities can be established to help farmers earn more income and reduce wastage.

She said, "On FDI in food retail, about USD 700 million investment has been proposed by Amazon, Grofers and Big Baskets. These firms have evinced interest to set up stores and have applied for necessary clearances with the commerce ministry."

Food processing minister Harsimrat Kaur Badal has made a fresh pitch for relaxing rules for foreign direct investment (FDI) in the food retail business, suggesting that the current norms have resulted in lower-than anticipated interest from companies.

The government had allowed 100% FDI in locally-produced and manufactured food products in a bid to encourage domestic industry and farmers, besides cutting down on wastage.

The policy was announced in February 2016, but companies such as Amazon, Metro Cash & Carry, Grofers and BigBasket that had sought government nod are yet to get a go-ahead. Major retailers such as Walmart, which had studied the model, have, however, stayed away so far as they want to enter when non-food items are also permitted.

The rules will also restrict the ability of a consumer to buy an imported food item from a store that has FDI.

Badal said, "Internationally, it's food plus other related items. Food has very small margins and to open a large outlet requires a lot of investment... That's why I wrote to the PM suggesting that infrastructure is needed at farm gate level for better price realisation and reduce wastage. It can be a sweetener for growth in capital-intensive infrastructure for seasonal produce. So, whatever a retailer invests in the back-end at the farm gate level, a small percentage of that, may be 20%, can be used for stocking other related home products. These goods can also be manufactured in India and will help create jobs."

The minister said "Over time, not as many people as we thought would enter retail have come. They are hoping that certain amount of flexibility is given."

Badal, however, repeatedly said that there had been a 40% jump in FDI in the food processing sector from around $500 million last year to $785 million so far in the current year and added that the steps taken by her ministry along with an easier policy regime for food retail could result in inflows of around $10 billion in the two segments over the remaining 24 months of the government's current term.

The SAD nominee in the Modi government also suggested a new tax policy for beverages that contain 5% juice.

PM's call to soft drink makers to have at least 5% juice content in some aerated drinks has prompted global giants such as PepsiCo and Coke to develop new formulations, for which standards have also been put in place. These companies are now awaiting clarity on taxes before the products hit shop shelves.

She said, "After the PM said this will impact farmers positively, new formulations have come up. Normally, aerated drinks have around 2% juice content and juices have over 10%. Now, industry says that the tax cannot be the same as aerated drinks but obviously it cannot be at the same level as juices. So, a new tax structure has to be made to promote and encourage it."

Under GST, juices are expected to attract around 12% duty, while aerated drinks will face access beyond 28%.

The minister also said that she has made a pitch to Finance Minister Arun Jaitley to ensure that food products are kept in the lowest tax bracket of 5% to ensure that consumers are not burdened with higher taxes in the GST regime.

Union Minister Harsimrat Kaur Badal has said the food sector is set for a quantum jump in the country with the Union Cabinet allocating Rs 6,000 crore for restructuring Scheme for Agro-Marine Processing and Development of Agro-Processing clusters (SAMPADA).

In a statement, the food processing minister said that the huge and much-needed investment in the food sector would leverage an investment of Rs 31,400 crore.

She said, "It will also result in handling of 3.34 crore metric tonnes of agro-produce valued at more than one lakh crore and benefit 20 lakh farmers. It will also generate 5.30 lakh direct and indirect jobs in the country by 2019-20."

Disclosing that the Rs 6,000 crore investment for the period 2016-20 was coterminous with the 14th Finance Commission cycle, the minister said SAMPADA would supplement agriculture, modernise processing and decrease agri-waste.

She said, "It will go a long way in doubling income of farmers and creating much-needed jobs in rural areas."

She said that the implementation of SAMPADA would result in creation of modern infrastructure with efficient supply chain management from farm gate to retail outlet.

"It will not only provide a big boost to the growth of food processing sector but will also help in reducing wastage of agricultural produce and enhance the export of processed foods," she said.

Various measures taken by the NDA government had led to seven per cent growth in the food processing sector, she said.

She said this growth had been made possible by according approval to 42 mega food parks and 236 integrated cold chains for creation of modern infrastructure for food processing along the value chain from the farm to the market.

She said besides this, 100 per cent FDI in trading, including e-commerce, had been allowed with respect to food products manufactured in India.

The government could decide by November this year to allow foreign food retailers to sell non-food items, food-processing minister Harsimrat Kaur Badal said while releasing a draft on the model food processing policy.

The government last year allowed 100% FDI in food retailing, but dropped plans to include some general merchandise, such as soaps and shampoos, in the policy, which retailers have been pushing for.

Badal said, "I think before November, when the World Food India 2017 fair is held in Delhi, the government will take a decision on this (allowing non-food items in FDI in food retailing)."

According to the draft policy, the suggested incentives and support measures include credit to set up new food-processing units or buy new equipment as part of technology up gradation, exemption of electricity duty for a few years, availability of water on a priority basis and VAT refunds.

To support marketing and promotion of Made in India brand for processed food, the draft policy has suggested to establish a special-purpose-vehicle fund in public private partnership to brand and market products followed by giving freight subsidy — air, sea and road — and support in research and development.

"Once we get comments from the state governments on the draft policy, we will fine-tune it and adopt it. This will then drive the national policy," Badal said, adding that despite a large production base, the level of processing is low — less than 10%. According to official figures, approximately 2% of fruits and vegetables, 8% marine, 35% milk, 6% poultry are processed in the country.

The minister recently met ambassadors and high commissioners of various states inviting them to invest in the country.

"The government wants to position India as a world food factory by creating a framework for the growth of the food processing industry," she said.

The food-processing ministry has suggested that states should focus on providing single-window clearance to improve ease of doing business and boost investors confidence, Badal said, pointing out that state governments should focus on commodity base cluster development, which would ensure farmers get remunerative prices for their produce.

Amazon has applied to the government to invest USD500 million in a wholly-owned venture in India that will allow the Seattle-based e-commerce titan to stock locally produced food items and sell them online, becoming the first foreign retailer to enter the segment.

Amazon currently operates an e-commerce marketplace and although India allows 100 per cent overseas capital in such platforms, these entities cannot sell products themselves.

The government, in a landmark landmark liberalising policy in the February 2016 budget, allowed 100 per cent foreign investment in retailing of processed foods made in India.

Amazon has filed its application with DIPP, which handles foreign investment in retailing and e-commerce, said a person familiar with the development. The company plans to invest USD500 million over five years and could start selling locally-produced food items within six months of obtaining approval, the person said.

An Amazon spokesperson said, "We are excited by the government's continued efforts to encourage FDI in India for a stronger food supply chain. We have sought an approval to invest and partner with the government in achieving this vision."

Amazon's application will be considered a showpiece for the government, which has so far been unable to attract foreign retailers and manufacturers after approving the food-retailing policy aimed at helping farmers and creating jobs.

Only hyperlocal grocery delivery companies Big-Basket and Grofers have applied under this category.

According to sources, Walmart Stores Inc was not interested in setting up outlets to sell only thin-margin food stuff and wanted the scope of products to be widened to include non-food items. Big-Basket applied late last year to invest Rs 100 crore in the food-retailing venture.

India notified the 2016 budget announcement in June, creating the food-only retailing segment and allowing 100 per cent FDI for companies selling locally sourced and produced food items through both brick-and-mortar stores and their online portals.

After the lacklustre response to the showpiece regulation, the government tried to drum up investments by inviting companies including Walmart, Nestle, Heinz and Thailand's CP Foods to seek their feedback and investment plans.

Minister for food processing industries Harsimrat Kaur Badal, the proponent of FDI in food retailing, led a team of officials to London last year and met representatives of British companies including Tesco, Sainsbury's, Harrods, Marks & Spencer and Cobra Beer to drum up support for the policy without any luck. 

Grofers, an online grocery delivery startup, has now scouted for government’s nod for Foreign Direct Investment (FDI) to carry out trading in food products. The move came right after government of India recently allowed 100 per cent FDI under government approval for trading, including through e-commerce, in respect of food products manufactured or produced in India.

As per the information on the website of the Department of Industrial Policy and Promotion (DIPP), Grofers India Pvt Ltd has sought approval "to undertake trading including through e-commerce in food products manufactured and/or produced in India".

Union Minister Harsimrat Kaur Badal has said India's food processing industry is expected to treble in coming years on the back of a higher economic growth. The size of the industry is about Rs 1.5 lakh crore.

The food processing ministry has recently put forth an idea of organizing World Food Summit in 2017. As per the ministry, this summit will act as a single podium for investors, technology solution providers, processors, manufacturers and all other relevant national and international stakeholders.

Though the Central Government has made its way clear for 100 per cent FDI (Foreign Direct Investment) in animal husbandry (including breeding of dogs), pisciculture, aquaculture and apiculture under automatic route, but unfortunately, the move has not managed to allure many foreign investors. The experts feel that the foreign investors are not ready to put their money on India, mainly because of the ban on cow slaughter.

In India, many states have joined their hands to curb the cow slaughter in their respective states but this has triggered a big controversy around the nation. Most of these states have banned this activity due to religious sentiments attached to the animal (Hindus considered cow as a holy animal). Sharing his views on the subject, Kuldeep Saluja, Managing Director, Sterling Agro Industries Ltd. maker of Nova brand of dairy products said that globally, non-milking cattle goes to slaughter house, which is not the case in India. So it's a big challenge for global dairy companies that want to enter the Indian market. Not being allowed to slaughter certain cattle is a huge drawback in India for global dairies.

In international markets unproductive cattle, most of which are cows, after being in dairies for 14-15 years, go to slaughter houses. A company expects 50-60 per cent return on investment on sale of each cow. Informing further, Saluja stated that 95 per cent of the cattle used in commercial dairy farming globally are cows and not buffaloes, unlike India. Hence, he said, the country is not lucrative for companies to attract FDI in animal husbandry sector.

International firms such as Fonterra of New Zealand, French cheese maker Fromageries Bel, Denmark's Arla, Dutch dairy cooperative Friesland Campina, Mexico's Grupo Lala, and Germany's Hochland Group have been exploring the Indian domain to fish in good opportunities to set up own units or to partner with local players.

The decision to allow 100 per cent FDI in multi-brand retailing of food products produced and manufactured in India will act as a catalyst for the processing sector, said, Harsimrat Kaur Badal, Union Minister Food Processing.

According to the minister allowing FDI in multi-brand food retail segment will result faster growth of the sector, reported PTI.

The minister was speaking at the Happening Haryana Global Investors Summit.

She said that food wastage has been estimated at around Rs 92,000 crore at present in the country and processing can help reduce the level of wastage as well as control inflation, create jobs and uplift the condition of farmers.

She also informed said that the NDA government has taken several initiatives to improve the condition of farmers such as the schemes relating to Fasal Bima Yojana, Organic Farming, E-platform for Mandis.