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India Government Puts Starbucks' Retail Plan on Hold

AP
Wednesday, 10 Jan 2007 | 4:46 AM ET

The Indian government has put on hold a proposal from Starbucks to open retail outlets in the country as the company hasn't provided complete information about its plan, a senior government official said.

Starbucks was among some 15 companies that applied to open stores in India after its government last year allowed foreign investment in retailing of single brand products.

Nine of those companies have got the government's approval while three were rejected. Proposals from three others, including Starbucks, are pending with the commerce and industry ministry, Industry Secretary Ajay Dua told reporters late Tuesday.

"We have sought more details on the nature of the business they want to do and the nature of arrangement they want to have," Dua said.

He said it wasn't clear from Starbucks' proposal if it wanted to open only coffee shops or also operate a chain of restaurants.

"Once we have their response, and if we are satisfied, we will move the proposal to the FIPB (Foreign Investment Promotion Board) for clearance," Dua said.

Until last year, India barred foreign investment in any kind of retail stores. Last year, it partially eased the policy by allowing foreign investment in single-brand retail stores subject to an equity cap of 51%.

That has helped companies like Nokia and Adidas to open their own stores. But multi-product retail giants like Wal-Mart Stores and Tesco are still barred from setting up their own stores.

In October 2006, Seattle-based Starbucks said it planned to have a presence in 40 countries outside the U.S., including India. Starbucks said at that time it was negotiating the terms of a joint venture for operations in India, with an initial focus on major cities such as New Delhi and Mumbai.

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