Amazon’s entry into the food retail business in India will move a step closer with the government set to issue the final certificate of approval to the company’s foreign direct investment (FDI) proposal in July, according to a senior official.
The Department of Industrial Policy and Promotion (DIPP), which had cleared the Seattle-based company’s proposal in April, will issue the clearance as the final authority on the matter after the abolition of the Foreign Investment Promotion Board (FIPB). DIPP had earlier sent the proposal to the Department of Economic Affairs for the final signing off by the finance minister.
However, with FIPB phased out, the decision now rests with the relevant department. Amazon will be the first big company to enter the food retail segment after the sector was opened up to foreign entities last year. DIPP is taking stock of all applications that were pending with FIPB and checking the status of each case.
“We will get a clear position next month and we will expedite all pending cases. Amazon’s application was cleared by us already and we will move ahead with the final certification next month,” said the senior government official cited above. The ecommerce giant had sought approval to invest Rs 3,500 crore in India over five years to sell third-party and its own private-label food products, sourced and packaged locally.
The application was filed earlier this year by Amazon Corporate Holding Pvt. Ltd, a Singaporebased subsidiary that will own 99% of the proposed entity. Amazon. com Inc., Mauritius, will hold the rest.
In its application to DIPP, Amazon said it plans to retail “food products (produced or manufactured in India) to customers at any location through any channel, offline or online, including ecommerce, across India.”
The government is also considering a proposal to allow the sale of personal care items by food retailers, limited to a proportion of 25% of the total. Grofers and Bigbasket are among companies that have applied for 100% FDI in food retail.
India had in June last year announced 100% FDI in food retail pertaining to goods manufactured locally. The policy change was aimed at giving a boost to the food-processing industry and the farming community.
The government wants to encourage organised retailers to source goods directly from farmers and reduce the role of middlemen who cut into the earnings of producers and often affect market prices.
The industry department is also set to roll out the Foreign Investment Facilitation Portal (FIFP) in July, having defined timelines for clearing FDI proposals by the respective departments.