THE Department of Industrial Policy and Promotion (Dipp) has yet again asked Bharti-Wal-Mart to explain its business model.
Dipp has asked the company to explain how the model would work in India given the restrictive FDI structure in retail. In its reply, Bharti has said the model is in total conformity with the country’s present FDI guidelines. “We reiterate that the joint venture has c o m p l i e d with the applicable requirements of law and guidelines in India including foreign direct investment (FDI),” the letter says.
The letter also said that the JV with Wal-Mart is on equal share for sale of commodities in select Indian cities for the requirement of customers. In its reply to Dipp, the company has stressed that 100% FDI is permitted in whole sale cash& carry model which is the JV with the Wal-Mart.
Last month, Bharti Enterprises signed two agreements with Wal-Mart. One, to set up a 50:50 joint venture for a kirana store-friendly wholesale (cash and carry) business with Sunil Mittal as the chairman of the six-member board and Raj Jain as the likely CEO. The second agreement relates to Wal-Mart extending technical expertise for various systems and processes to Bharti’s front-end retail venture, for a fee. “As and when the FDI is opened up Wal-Mart would be our natural partners,” Mr Mittal said at the time of signing the backend JV. The world’s largest retailer has finally got a toehold in the Indian market, although serving individual customers may still be far away, as FDI in front away is a distant dream. Wal-Mart is entering a large country like India after a decade, perhaps the only country where it will confine its operations to the cash and carry business and that too with a joint venture partner.
The last large market that Wal-Mart entered was China (1996) where it operates 83 retail stores across 46 cities. With the US market shrinking and the recent exits from Germany and Korea limiting growth, India is the only large market where Wal-Mart can look for additional revenue