Govt set to ease FDI rules for companies

'Indications are that the UPA government will stoop down to any level to appease the foreign investors. The UPA government has yielded to the constant lobbying by Walmart and other multinational retail giants and pressure form their home governments, especially the United States. It is reported that extraneous considerations have played a dominant role and as a result erroneous factors have weighed over legal issues and sentiment of the cross section of the society--almost all the political parties, traders’ bodies, farmers’ associations, experts and the public in general. The government is likely to have an open door policy whereby the foreign investors can enter the country without any barriers and do any kind of business without any conditions. Therefore, it is not surprising to find that let foreign investors will be allowed to subscribe to warrants and partly paid-up shares issued by companies under the automatic route in the guise of speeding up approval and facilitate faster flow of overseas funds into the economy. In reality, what the nation needs today is not FDI, but efficient and effective use of the resources of the country. If proper measures are undertaken, it would be possible to mobilise vast amount of money available with the people of the country. In the past few years fraudulent private players have raised hundreds of thousands of crores by offering high rates of interest as well as return on investment. Almost every day complaints are pouring in about large scale looting of peoples’ hard earned savings. For instance, in the past few in the western part of Tamilnadu alone (Coimbatore, Salem, Erode Namakkal and Thirupattur) nearly tow lakh crores of rupees have been fraudulently looted through phony schemes Lured by such get-rich-quick schemes such as stock market scam, commodity trading scam, gold quest scam multi-level marketing (MLM) scandal, emu farming scam, chit fund fraud, land scam, etc. people have lost lakhs of crores of rupees during the past decade or so, particularly during the past few years. Moreover, thousands of crores have been looted by the corporate sector in the form of company deposits. Had the government and RBI took serious efforts to channelise the savings of the people into productive investment, the people would not have fallen victims to such frauds and the country would have been able to moblise adequate funds for investment. In reality, what the nation needs today is not FDI, but efficient and effective use of the resources of the country. Moreover, FDI in retail is very different from FDI in high-tech sectors and infrastructure. Many people don't realise that because of misleading propaganda by the government and other votaries of FDI in retail trade. Chains like Wamart are disliked even in the US by a lot of people for their predatory strategy''

Dr.C.Murukadas, The Times of India, Oct. 17, 2012

PIL filed on Walmart subsidiary's investment in two firms

Before the Union government allowed FDI in multi brand retail on September 14, 2012 it was prohibited under Foreign Exchange Management Act, 1999 ( FEMA) and Foreign Exchange Management (Transfer or Issue of Security by a person resident outside India) Regulations 2000. In his complaint submitted to the Prime Minister's Office CPI Rajya Sabha member MP Achuthan alleged that Walmart had invested about R456-crore in a company called Cedar Support Services through compulsorily convertible debentures (CCDs) in March 2010. The Prime Minister's Office (PMO) has no other go but to forward to the Department of Industrial Policy and Promotion (DIPP).. PIL filed in the Madras High Court by T Vellaiyan, President, and Federation of Tamil Nadu Traders' Association is timely and appropriate. The PIL has brought to light the fraudulent activities of Walmart. That is, in March and April this year, Walmart Stores Inc, USA through its subsidiary, in collusion with two Indian firms, illegally invested Rs 455.80 crore in multi brand retail in India by masquerading it as for 'Services Sector. ‘Multinational corporations like Walmart generally do not respect the rules and regulations of the host countries. They often violate the laws and indulge in unlawful activities. Walmart has already has a joint venture with Bharati. It is alleged that Bharti-Walmart is illegally carrying out multi-brand retail trade despite being permitted only to carry out wholesale cash-and-carry or wholesale trade. 

 Dr.C.Murukadas, Economic Times, Oct.17,2012

Farm to fork: Wal-Mart faces sourcing challenge in India

Farm to fork is a misleading epithet used by the government and multinational retail giants like Walmart to hoodwink the people. As far as India is concerned it is impracticable to directly procure from famers by the foreign retail giants because of the extremely small size of the farms. Walmart and other retail giants must have to buy in small batches from small plot-holders in a country where most of the farms are less than 2 hectares. That means contracting with thousands of farmers will still yield only a few thousand tonnes. In North America, Europe and Australia retailers like Walmart can buy from a few hundred farmers who provide hundreds of thousands of tonnes of produce between them. The local Indian mega corporate retailers, at the start of their retail trading business, had proclaimed that they would model their trade on “Farm to Fork” concept, i.e. buying directly from farmers and selling to the consumers. But a study by RFSTE/ Navdanya revealed that Reliance Retail was very much found to procure food items from mandis. Available information indicates that the practices of other corporate retail giants do not differ from that of Reliance Retail. Therefore, there is no guarantee that the multinational retail giants will not resort to such a trend. Experiences show that nowhere in the world have the farmers who supply goods to big retail chains benefited. It is difficult to understand how they would benefit, when the big retail players like Wamart look for the cheapest possible suppliers. To begin with, they might offer higher prices, inputs and finance; but that would be only until they are able to eliminate the traditional channels of supply. Ultimately the farmers will have no choice but to sell to big players -- at any price as happened in many countries. For instance, in Western countries, 110 buying desk of big companies control the flow of goods from 3.2 million farmers supplying to over 160 million consumers. A detailed examination of information available on the impact of allowing multi-brand global biggies including Walmart, Carrefour and Tesco into countries such as Indonesia, Thailand, Brazil, Canada, Germany, etc., indicates that they will ultimately eliminate competition and will indulge in monopolistic practices; finally putting the farmers under their clutches. . Evidences show that farmers in the West have paid a big price, with hundreds of thousands forced to abandon their farms, due to corporatisation of the farming sector, along with corporate control of the purchasing side among processors and retailers. Therefore, there is no point in giving this stake (i.e. multi-brand retail trading) to the foreign retailers, albeit to cater inflation. India might receive some foreign direct investments; but this will make the situation even worse by displacing the farmers leading to increase in rural unemployment and poverty.

Sharad Pawar has a misconceived notion FDI in multi-brand retail

Union agriculture minister Sharad Pawar  has a misconceived notion that FDI in multi-brand retail will cut down post-harvest losses to farmers and bring investment in cold-chain facilities. The stated purpose of liberalising FDI in retail is that it will attract investments for modernising India’s supply-chain infrastructure, especially for the agricultural sector, in turn, providing better returns to farmers and small agro-processing units through enhanced direct sourcing as well as curbing inflation by reducing wastage. The argument is that the giant foreign retail chains will squeeze out the middlemen thereby providing higher prices to farmers and at the same time provide large investments for the development of post-harvest and cold chain infrastructure. In India, the relaxation of regulations already allows foreign direct investment in cold-chain infrastructure to the extent of 100 percent. But there has been modest increase in foreign direct investment in cold storage infrastructure. According to them, the cold storage infrastructure will become economically viable only when there is strong and contractually-binding from organised retail. The risk of cold storing perishable food, without an assured way to move and sell it, puts the economic viability of expensive cold storage in doubt. The condition for making at least 50 percent of the total investment in ‘back end’ infrastructure under the proposed FDI scheme is being cited to argue that this would lead to more cold chains and other logistics, benefiting the farmers. But experiences of other countries, however, show that procurement by various multinational retailers do not benefit the small farmers. “Over time, they receive depressed prices and find it difficult to meet the arbitrary quality Standards.  Experiences show that nowhere in the world have the farmers who supply goods to big retail chains benefited. Walmart is reported to be planning a series of partnerships with small and mid-level suppliers in India across product categories to create a big list of private label brands that will be priced substantially lower - as much as 10-15% - than established products and brands. The move is part of the company's strategy to go deeper into the into those states which do not allow Walmart to set up shops. It also signifies that Walmart is going against its original commitment that that will directly procure from the farmers and hence the farmers will get better price. According to Mr. Jain 95% of what they sell will procured from within the country. But what is the guarantee that Walmart will continue to do so. In fact, in other countries, including the United States, Walmart is selling cheap Chinese goods.  Walmart has already has a joint venture with Bharati. It is alleged that Bharti-Walmart is illegally carrying out multi-brand retail trade despite being permitted only to carry out wholesale cash-and-carry or wholesale trade in the country. On the basis of the suit filed by environmental activist Vandana Shiva, the Delhi High Court sought replies of the Centre, Bharti-Walmart and Bharti Retail on a plea for a probe against the firms for allegedly carrying out retail trading in the multi-brand sector in violation of India’s existing FDI policy. Thus, even before getting permission to operate, Walmart has violated Indian rules and regulations and has unlawfully involved in multi-brand retail trading.

 Dr.C.Murukadas, The Times of India Oct 13, 2012

FDI in multi-brand retail to help farmers: Sharad Pawar

Wal-Mart, Bharti deal under probe on FDI norms violation

No wonder that Walmart had entered India's front-end multi-brand retail business two-and-a-half years before the government actually lifted the ban on foreign investors. It is not surprising to note that the Prime Minister's Office (PMO) has forwarded to the Department of Industrial Policy and Promotion (DIPP), an allegation by CPI Rajya Sabha member MP Achuthan that raised specific questions on Wal-Mart's R456-crore investment in a company called Cedar Support Services through compulsorily convertible debentures (CCDs) in March 2010. Multinational corporations like Walmart generally do not respect the rules and regulations of the host countries, particularly the developing countries. Reports suggest that they often violate the laws and indulge in unlawful activities .For instance, when the foreign banks such as Citi Bank and HSBC entered India, they agreed to adhere to the rules and regulations imposed by Reserve Bank  of India and strictly follow the laws of the land. But after stepping into Indian soils they often violated the BRI guidelines as well as rules and regulations, besides breaking Indian laws. Quite often they indulged in criminal and unlawful activities. In their efforts to broad base their activities and customer base such foreign private banks, through advertising, propaganda and persuasion, had brought into their net a large section of the urban middle class people. In fact, millions of unwary urban middle class households, who have a bundle of unmet needs, were drawn to enter into a borrowing spree. Many of them were chained to the perpetual wheel of borrowing and indebtedness, through the issue of credit cards and leasing and hire purchase. The saddening aspect of such a trend is that many households had undergone extreme troubles and tribulations to meet the monthly commitment for the repayment of hire money or other obligations. Such foreign banks often adopted unlawful and criminal tactics to realise the payment due from the distressed borrowers. Some of the techniques followed by them are unknown in their countries of origin. The modus operandi is to engage “collection agents” who, in turn, with the help of `paid goondas’ visit the customers at the office  premises, residences and at odd places at odd times, including  during midnight and early mornings, and intimidate them, including women, children and the aged. Sometimes they forcefully take away household articles, jewels and other immovables. There are also instances in which they have obtained forcefully signatures of the customers for the sale of their immovable properties. In one instance, in Mumbai, one such agent of Citibank N.A. demanded “the kidney of a customer” in lieu of repayment of loan.  In another incident in chennai the goondas engaged by one such agent of the Citibank N.A. abducted a young entrepreneur from his residence, kept him in custody and beaten him mercilessly causing grievous injury.  It was reported that but for the intervention of the Chennai Police Commissioner, he would have been tortured and done away with.  

   Walmart currently partners Sunil Mittal-led Bharti Enterprises and it has stated that the partnership will continue. Apart from that Walmart is reported to be planning a series of partnerships with small and mid-level suppliers in India across product categories to create a big list of private label brands that will be priced substantially lower - as much as 10-15% - than established products and brands. The move is part of the company's strategy to go deeper into the into those states which do not allow Walmart to set up shops. It also signifies that Walmart is going against its original commitment that that will directly procure from the farmers and hence the farmers will get better price. According to Mr. Jain 95% of what they sell will procured from within the country. But what is the guarantee that Walmart will continue to do so. In fact, in other countries, including the United States, Walmart is selling cheap Chinese goods.  Walmart has already has a joint venture with Bharati. It is alleged that Bharti-Walmart is illegally carrying out multi-brand retail trade despite being permitted only to carry out wholesale cash-and-carry or wholesale trade in the country. On the basis of the suit filed by environmental activist Vandana Shiva, the Delhi High Court sought replies of the Centre, Bharti-Walmart and Bharti Retail on a plea for a probe against the firms for allegedly carrying out retail trading in the multi-brand sector in violation of India’s existing FDI policy. Thus, even before getting permission to operate, Walmart has violated Indian rules and regulations and has unlawfully involved in multi-brand retail trading. Will Walmart and other multinational retail giants respect Indian laws once permission is granted to operate multi-brand retail stores?

   Dr.C.Murukadas, Hindustan Times, October 12, 2012

Decision on FDI taken by consensus, says Anand Sharma

 It is an open secret that the  decision to allow FDI in mult-ibrand  retail trade was taken  due to powerful lobbying by Walmart and other multinational retail giants and pressure from their home governments, particularly the US and European Union.  Reports show that extraneous considerations have played a dominant role for taking the erroneous decision to allow 51% FDI in multi-brand retail trade despite strong opposition from all quarters. Commerce, Industry and Textiles Minister Anand Sharma has  been making misleading and false statements on FDI in mult-ibrand retail.  His view of consensus is irrational and absurd. Consensus means that an overwhelming majority agree to a particular idea or measure. In the case of FDI, only a small section has expressed agreement with the decision to allow FDI in mult-ibrand retail, that too under persuasion and threat.  FDI in multi-brand retail trade has been notified much against the sentiments and wishes of almost the entire spectrum of political parties, trading community, farming society, and, of course, an overwhelming majority of the citizen of the country. Mrs. Mamata Banerjee, West Bengal Chief Minister, has alleged that the FDI decision was unveiled only to divert attention from the “coalgate” scandal involving the government. Moreover, many experts have questioned the perceived benefits of the so called “reforms,” particularly 51 percent FDI in multi-brand retail trade. The general consensus is that no point in pressing for a change in policy measures (or conveniently termed as reform) that evokes strong condemnation and disapproval from all sections--political parties, traders’ bodies, farmers’ associations, experts and the public in general. Anand Sharma and the other votaries of FDI in multi-brand retail trade know very well that it will do more harm than benefit to the people. Then, why is this hypocrisy?

 Dr.C.Murukadas, India Today, Oct. 7,2012

UPA govt deceiving people in name of grand reforms: Jayalalithaa

Tamilnadu Chief Minister Dr. J. Jayalalithaa has always   been concerned about the welfare of the downtrodden people. So she never failed to oppose anti-people measures, conveniently termed as “reform” undertaken by the UPA government.  In fact, reform is a much maligned word in this India and has come to be associated with just price increase and foreign direct investment. Dr. J. Jayalalithaa deserves appreciation for her   stand in opposing FDI in retail trade, insurance and pension funds. On 24th November, 2011, the Government of India took the hasty, illogical and unsound decision to allow 51 percent foreign direct investment (FDI) in multi-brand retail and 100 percent FDI in single–brand retail.  The decision to allow FDI in retail trade evoked severe opposition from almost all political parties, traders, farmers and the public in general.  In fact, the Tamilnadu Chief Minister immediately opposed the decision of the central government to allow FDI in retail trade. She  expressed her strong resentment as follows: “The sudden decision of the Government of India to open up Foreign Direct Investment  up to 51 percent in multi-brand  retailing and (FDI) 100 percent for single brand retailing   has come as a  rude shock to the thunder struck millions  of traditional  retail vendors in the country….I strongly  feel  that this decision of    the Government of India is a wrong decision, taken and  under pressure from a few  retail  giants, who are starved for capital infusion for their future survival….Therefore, I am constrained to state that my Government will not allow the multi brand global players as permitted under the new policy to set up their hyper markets   in Tamil Nadu.”  Again when   (on October 9, 2012) the Union Cabinet ultimately took the retrograde step to allow 51 percent FDI in multi-brand retail trade, Dr.J Jayalalitha vehemently condemned the decision. She reiterated that: "I would like to register my unequivocal opposition to the decision of the central government to allow 51 percent FDI in multi-brand retailing and demand that the central government should withdraw its decision immediately. Further, my government will never allow FDI in retail trade in Tamil Nadu.” The firm stand taken by her against allowing 51% FDI in retail trade has been acclaimed by leaders of various like minded political parties, traders’ associations, farmers’ bodies and the general public.  Contd….

On October 5, 2012 the Cabinet cleared 49% foreign direct investment (FDI) in the insurance sector, 26% in the pension sector, cleared the Companies Bill 2011, amended the Forward Contracts Regulation Act and the Competition Act. The decision to allow FDI in insurance and pension has received the condemnation of a cross section of the society.  Many experts believe that the new set of economic reforms announced by India is not necessary to promote economic development and to ensure welfare of the people. The UPA government is unwarrantably obsessed with FDI. Cross country data show that FDI in vital sectors affecting the livelihood of the people create more harm than benefit to the people. The Tamilnadu Chief Minister   is right in expressed strong disapproval to the Centre allowing foreign direct investment in insurance and pension funds sectors. She has blamed that the UPA Government at the Centre for inflicting harm upon the people in the name of reform.  According to her, "The UPA government is unfazed at the sufferings of the common people, small traders and small farmers .....This move at best is a gimmick and at worst an unworthy risk.'' She added, "The act of disguising harmful decisions and promoting them under the name of grand reforms amounts to deceiving the people of the country. No amount of rhetoric will change the truth…
As to whether they have the right to jeopardise this crucial sector is a debatable issue."

Many believe that it is unethical for the UPA government to bring such anti-people “reforms” because it is now reduced to a minority status. Trinamool Congress has already announced the withdrawal of support to UPA government. The second biggest allay, DMK, has also stated that it would not back the government on any resolution brought against the government on FDI in multi-brand retail trade. The Tamil Nadu Chief Minister, Dr. J.Jayalalithaa, has vehemently opposed the decisions. Samajwadi Party (SP) supremo Mulayam Singh Yadav has expressed support to Mamata Banerjee's resolution. Likewise, almost all opposition parties such as BJP, CPM, CPI, Janatha Dal (United), Telugudesam Party, Bhahujan Samajwadi Party, and a host of other minor parties have expressed their strong resentment. Therefore, there is no chance for the UPA government to survive any no confidence motion brought by Trinamool Congress or any other party. It is quite possible that the government would find it extremely difficult muster adequate support for raising the cap on foreign direct investment in insurance firms and open the pension sector to foreign investors.

Dr.C.Murukadas, The Times of India, Oct.6,2012