NEW DELHI: The Supreme Court on Tuesday said it would test the constitutional validity of the Centre's decision to allow foreign direct investment (FDI) in multi-brand retail and asked the UPA government to spell out the safeguards put in place to protect small traders from possible onslaught of multinationals in future.
Parliament's approval of the policy decision was cited by Attorney General G E Vahanvati to clinch the issue before a bench of Justices R M Lodha and S J Mukhopadhaya, which was hearing a PIL filed by advocate M L Sharma alleging that permitting FDI in retail was in breach of FEMA Regulations.
The bench asked whether the government has received FDI proposals since Parliament approved the policy decision. "It is now six-seven weeks since Parliament approved the decision. Now the policy is in place. What has happened since then? Have you received some investment or was it just a political gimmick," it said.
Taken aback by the terse comments, the AG said receiving FDI in retail would take some time as it was a part of series of reforms that would slowly transform the country's investment scenario to make it lucrative enough for the foreign investors and, more importantly, beneficial for the consumers and small traders.
"FDI in India has already registered a substantial increase. The whole outlook for India as an investment decision has undergone a positive change," Vahanvati said and stuck to his argument that it was a policy decision approved by Parliament after a detailed debate and hence the courts could not go into the necessity of such a move by the executive.
But, the bench said, "it is a policy decision alright but its legal validity is challenged. The government must satisfy the court on this count." It said the petitioner alleged that the decision posed a serious threat to the existence of small traders. "We want to know what steps had been taken by the government to alleviate these fears?" the bench asked.
Vahanvati said these were the concerns Parliament debated before approving the decision permitting FDI in retail. But, the bench was firm to examine the decision to permit FDI in retail not only from the small traders' point of view but from all angles and asked the government to file an affidavit in three weeks giving a detailed response to all apprehensions and legal challenges specified in the PIL.
To explain its mind, the bench gave an illustration on elimination of competition by big players in India where small traders have traditionally played the role of friendly shop next door where one could bargain a good deal on virtually every consumable item.
The bench said, "Once the big players come in, they artificially so bring down the price that the small traders fail to match the price tag and are forced to shut shop. Once the competition is eliminated in this process, the big players jack up the price leaving the consumer no option but to pay."
Vahanvati said there was adequate legal framework to protect small traders from unfair means meant to kill competition and pointed out the setting up of Competition Commission. But, the bench asked, "How many small traders can move the forum?"
On October 16, the court had said the permission to allow FDI in multi-brand retail appeared to be at variance with the FEMA Regulations. Two weeks later, the Reserve Bank of India (RBI) amended the regulations and the amendments were approved by Parliament.
Petitioner had said that Regulation 5 read with provisions of FEMA strictly prohibited FDI in retail trading (except in single brand product retailing), atomic energy, lottery, gambling and betting, business of chit funds, Nidhi company, trading in transferable development rights (TDRs) and activities/sectors not opened to private investment.
dhananjay.mahapatra@timesgroup.com
Is FDI in retail a gimmick? SC asks
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Is FDI in retail a gimmick? SC asks
