New Delhi, July 20 () : Walmart’s investment of $100 million in Bharti Retail’s Cedar support in 2010, violated India’s foreign exchange rules, FEMA as well as Reserve Bank of India (RBI) guidelines on FDI, said CBI.
It pointed out that these violations did not come within its purview, so it cannot investigate the matter. This was communicated to M P Achithan CPI Rajya Sabha member. The member has written to the PM with a copy to CBI and CVC. CVC has appointed an officer to probe the charges.
The ED, the agency that probes alleged FEMA violations, has already started investigating the transaction. Walmart and Bharti officials are summoned before ED. In March 2010, Wal-Mart, using the Mauritius subsidiary route, invested $100 million as Compulsorily Convertible Debentures (CCD) into Cedar Support with the clause that it will have the option to convert CCDs into 49% equity in the future. In 2010, FDI in retail was banned. However Walmart claims that it comes under the India- Mauritius treaty.
Walmart claims that all transactions adhere to FDI Guidelines and cooperated with the government during the probe. Bharti too has taken the same stance. In a related development Bharti Retail who leased out properties for Walmart entry and open Easyday stores has got the signal that the entry of the retail giant will get delayed. It has now given back 17 properties back to owners.
Walmart is facing probe under the US Foreign Corrupt Practices Act (FCPA) for bribing officials to get permission to open stores in Mexico. If found guilty, then the fines would be heavy.
In India, it is not possible to operate without bribing lower-level local government officials to get around 50 licenses to enter front end retailing. With the US Foreign Corrupt Practices Act guidelines, it will find it hard to operate.
At present, Walmart does the back-end operations providing supply chain while Bharti looks after the front-end operations of running the outlets.