AAP's stand on retail FDI presents intriguing possibilities

The Aam Aadmi Party, on a high since the Assembly elections in December, could lose out on its stand to withdraw the Delhi government’s support to foreign direct investment in multi-brand retail.

While there are chances the Centre might have its way on letting Delhi remain a destination for foreign supermarkets, the possibility of the AAP government falling over the retail FDI issue is not being ruled out either.

Ahead of the general elections this year, the Centre will have to decide on opposing AAP on this issue, especially as loss of jobs is the argument being raised against FDI in multi-brand retail.

Constitution expert Subhash Kashyap told Business Standard Delhi was between a state and a centrally administered entity.

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“So, if there’s a conflict between the Union government and the Delhi government, even if the matter pertains to the state list, Union law will prevail,” he said.

However, in the case of states, state law will prevail in a similar situation.

“If it is an executive decision (as is the case with the retail policy), executive powers (of the Centre) are co-extensive (with the same limits or scope) with legislative powers,” Kashyap added, referring to a conflict situation.

Asked about the Delhi government’s stand on retail FDI, he said, “Legislative power of the Union government will prevail over the Delhi government’s.”

He, however, said he was only talking about the constitutional position, adding ultimately, the Centre would take a political decision on the matter.

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A source in the government said the Department of Industrial Policy and Promotion under the commerce and industry ministry was likely to consult the home ministry, responsible for Delhi and which handled Centre-state relations.

The home ministry may, in turn, consult its law counterpart on how to proceed in the matter.

Agreeing with Kashyap, the source said, “It’s clear the Centre has overriding powers in the case of Union territories, which is what Delhi is, and the question is whether it will decide to exercise those powers.”

On the retail FDI issue, a possibility being talked about in the corridors of power is the Congress might withdraw its support to AAP in Delhi.

This will result in a defeat of the government when the Delhi budget has to be passed through a vote in the Assembly.

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Defeat of a money Bill means the government will have to resign.

A no-confidence motion was ruled out, as it couldn’t be introduced in the same session twice, experts said.

As AAP did not have enough seats in the Delhi Assembly polls, the Congress is supporting it from outside.

“It’s a most intriguing test case,” an official said.

Diljeet Titus, founding partner of Titus & Co, a law firm handling many foreign retail brands’ entry into the country, said, “If the Centre chooses to exert itself against the Delhi government stand, the Arvind Kejriwal-led AAP will have no say.”

However, citing the multi-brand retail policy, Anand Desai, managing partner at law firm DSK Legal, said, “It (the multi brand retail) is only an enabling policy.”

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He added states and Union territories were free to take their own decisions with regard to implementation of the policy.

In September 2012, the Union Cabinet had cleared up to 51 per cent foreign investment in multi-brand retail, while giving states the power to decide if an international chain could open stores there or not.

Though the Congress-run Delhi government had extended support to the policy earlier, the new government under AAP recently wrote to DIPP, saying Delhi must be struck off the list of states backing FDI in multi-brand retail.

The Delhi government is the first to have withdrawn support to retail FDI after backing it initially.

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Rajasthan, now under Bharatiya Janata Party rule, could follow.

Recently, UK-based Tesco became the first international chain to enter the multi-brand space, with a Rs 680-crore-(Rs 6.8 billion) proposal.

But Tesco, in partnership with Tata group’s Trent, will open stores only in Karnataka and Maharashtra, both ruled by the Congress.

Various political parties, including the BJP, the Dravida Munnetra Kazhagam, the Trinamool Congress, the Samajwadi Party and AAP, are opposed to retail FDI.

Many in favour of retail FDI are poll-bound this year. These include the Congress-ruled Andhra Pradesh, Maharashtra and Haryana.

Other states/Union territories supporting FDI in this segment are Manipur, Assam, Karnataka, Himachal Pradesh, Uttarakhand, Jammu & Kashmir, Daman & Diu, Dadra and Nagar Haveli.