NEW DELHI, MAY 4: With global retailers making a beeline for setting up cash and carry wholesale trading business in the country, the government has decided to issue a fresh set of guidelines governing wholesale trading under the Foreign Direct Investment (FDI) policy to check misuse of the current policy.

Speaking to The Indian Express, highly placed sources in the Commerce and Industry Ministry revealed that the Department of Industrial Policy and Promotion (DIPP) has decided to issue fresh guidelines taking suo motto notice of the current situation. “It was essential to come up with detailed guidelines on wholesale trading permitted under the current FDI policy. These guidelines will have built-in checks and measures to prevent misuse of the current policy,” the ministry official added.

Refusing to share details, the source added that the guidelines have been framed by DIPP and are awaiting internal clearances. “The guidelines are ready. We are just awaiting the approval of appropriate authorities and intra-departmental clearances,” the source said, adding that the guidelines are likely to be announced within a month.

The existing guidelines stipulate producing mandatory value added tax (VAT) registration number at the time of purchase, minimum purchase amount and buying minimum number of items. Industry sources reveal that the new guidelines are likely to be stringent to check misuse. “They could include a penalty mechanism, stringent norms for customer registration and verification, and minimum purchase criteria. They could also state merchandising categories and compliance information. These guidelines will be informative as well provide guidance to the new businesses,” said an industry source.

The government had earlier stipulated that wholesale trade under FDI policy can be conducted only for business-to-business (B2B) purposes and not for retail customers. The intention was to infuse infrastructure competence and spruce up the supply chain. Even though authorities denied having received any complaints against erring retailers, cases of violations came to light.

Currently, FDI is allowed under the automatic route in cash and carry wholesale trading up to 100 per cent. However, till now only two foreign retailers — Germany-based Metro CC and South Africa-based Shoprite — have set up shop in India. At the same time, Tesco (UK), Carrefour (France), and WalMart (US) — in a JV with Bharti Enterprises — have already announced their intention of setting up wholesale shops in India.