While Wal-Mart Stores Inc. seems to have cleared one hurdle that was slowing the American retail giant’s attempts to tap India’s rapidly expanding $400 billion retail industry; others still remain.
The Finance Ministry’s Enforcement Directorate has cleared Wal-Mart of violating investment rules when it bought an indirect stake in the Bharti Enterprises Ltd. unit, which controls its Easyday chain of supermarkets, according to two sources familiar with the investigation.
However the company still faces a public interest litigation suit in the high court in the southern city of Chennai on the same issue. The suit claims Wal-Mart broke India’s ban on foreign investment in supermarkets and other stores that sell multiple brands of products when it in 2010 bought convertible debentures from Bharti’s Cedar Support Services which owns Easyday.
Officials familiar with the finance ministry’s findings on the debenture purchase said that the central bank and finance ministry would present the results of their investigation to the court in Chennai at the next hearing, which has not yet been set.
While a Wal-Mart spokeswoman did not immediately respond to a request for comment Friday, the retailer has said its purchase of the debentures had been discussed with authorities and did not break any rules.
The lawyer of T. Vellayan–the former president of the Federation of Tamil Nadu Traders’ Association who filed the public interest litigation last October –could not be reached for comment Friday.
Wal-Mart is also waiting for restrictions on foreign retailers to be further eased before it can make bigger expansion plans in the country. The company says that a requirement that foreign retailers source at least 30% of its products from small- to medium-sized local businesses is untenable.
“One only has to walk the stores of a domestic player in India and know that rules such as the 30% sourcing from medium and small enterprises is simply not possible,” said Scott Price, the head of Wal-Mart’s Asia business in an interview earlier this month. “I’ve explained to the government I’m more than happy to launch a Wal-Mart cola, but the problem is that I can’t make anyone buy it.”
Indian officials, including Finance Minister Palaniappan Chidambaram have so far indicated India plans to keep that restriction in place.
The Finance Ministry’s Enforcement Directorate has cleared Wal-Mart of violating investment rules when it bought an indirect stake in the Bharti Enterprises Ltd. unit, which controls its Easyday chain of supermarkets, according to two sources familiar with the investigation.
However the company still faces a public interest litigation suit in the high court in the southern city of Chennai on the same issue. The suit claims Wal-Mart broke India’s ban on foreign investment in supermarkets and other stores that sell multiple brands of products when it in 2010 bought convertible debentures from Bharti’s Cedar Support Services which owns Easyday.
Officials familiar with the finance ministry’s findings on the debenture purchase said that the central bank and finance ministry would present the results of their investigation to the court in Chennai at the next hearing, which has not yet been set.
While a Wal-Mart spokeswoman did not immediately respond to a request for comment Friday, the retailer has said its purchase of the debentures had been discussed with authorities and did not break any rules.
The lawyer of T. Vellayan–the former president of the Federation of Tamil Nadu Traders’ Association who filed the public interest litigation last October –could not be reached for comment Friday.
Wal-Mart is also waiting for restrictions on foreign retailers to be further eased before it can make bigger expansion plans in the country. The company says that a requirement that foreign retailers source at least 30% of its products from small- to medium-sized local businesses is untenable.
“One only has to walk the stores of a domestic player in India and know that rules such as the 30% sourcing from medium and small enterprises is simply not possible,” said Scott Price, the head of Wal-Mart’s Asia business in an interview earlier this month. “I’ve explained to the government I’m more than happy to launch a Wal-Mart cola, but the problem is that I can’t make anyone buy it.”
Indian officials, including Finance Minister Palaniappan Chidambaram have so far indicated India plans to keep that restriction in place.
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