After getting cornered by the Supreme Court for scams and controversies for quite some time, the UPA government on Wednesday had something to cheer about with the apex court upholding the constitutional validity of its decision allowing 51% foreign direct investment in the multi-brand retail sector. 

A bench of Justices R M Lodha, Madan B Lokur and Kurian Joseph, which on Tuesday tore into the CBI and the Centre for sharing the coal scam probe report with the political executive, saw merit in attorney general G E Vahanvati's arguments and said the policy aimed to eliminate middlemen and help provide farmers a better price for their produce. 

"The middlemen are a curse to the country. They work like Shylocks and suckers. If they are sought to be thrown out of the system, what is wrong with the policy," the bench said and asked petitioner advocate M L Sharma to point out constitutional and statutory deficiencies in the policy already debated and approved by Parliament in December last year. 

Sharma said nobody would shed a tear if middlemen were eliminated but the policy would hit small retail traders, who would be ill-equipped to compete with the might and business skills of multinationals venturing into the retail sector. 

The bench said it would not hazard a guess about the success of the policy but there was no harm in giving it a chance. "The policy may fail, who knows? But it deserves a chance. The government has done studies and found that those countries were FDI in retail had been permitted, the small traders continued to control an overwhelming percentage of food product retail chain," it said. 

The court found no merit in the petition and dismissed it. But before this, Sharma had pointed out certain procedural deficiencies in the notification of the decision permitting FDI in retail and had forced the government to rush with an amendment to the earlier notification bringing it in order with Foreign Exchange Management Act regulations. 

The court also took note of Vahanvati's contention that implementation of the Centre's policy was optional and was not being foisted on the states. In addition, the policy, when fully implemented, would touch the lives of only 13.3% of the country's population living in 53 cities. The government said its policy on FDI in multi-brand retail stipulated that retail sales outlets could be set up only in cities with a population of over 1 million. 

"Even if the policy is fully implemented throughout the country, there are only 53 urban agglomerates/cities with million plus population. These 53 comprise only 0.67% of the total number of cities and have a total population of 160.7 million, compared to the total population of India of 1210 million, which is only 13.3%," the Centre had said. 

The Centre had given examples of China, Brazil, Argentina, Singapore, Indonesia and Thailand where FDI was permitted up to 100% and still local retailers co-existed with organized retail. "In Indonesia, even after several years of emergence of supermarkets, 99% of fresh food retail and 70% of all food retail continues to be controlled by traditional retailers," the Centre said. (Times of India)