Armed with the view that opening up the food retail would benefit farmers and the food processing industry, the proposal is to allow up to 26 per cent FDI for first two years and subsequently increase it after seeing the results to 49 per cent and then to 74 after three years, official sources told the media.
Commerce Minister Kamal Nath had said on Monday that government was readying a discussion paper on the issue.
The government wants to tread cautiously on FDI in retail with Left Parties vehemently opposing to any opening up. Prime Minister Manmohan Singh will discuss it with them before the Cabinet takes up the proposal.
Leading economic think-tank ICRIER which conducted a study on behalf of Consumer Affairs Ministry had also advocated FDI of up to 49 per cent in a phased manner.
It had suggested repealing of the Essential Commodities Act and doing away with the maximum retail price based regime.
Pointing that the retail sector which contributed 10 per cent of country's GDP was highly fragmented, the study had suggested a 3-5 year time frame for complete opening to give domestic retailers enough time to adjust to changes.
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