India's government is to propose watered down legislation later this month to open up the retail sector to foreign supermarkets, news reports said on Tuesday.
The Mail Today tabloid and Hindustan Times reported that the government would propose allowing groups such as US giant Wal-Mart or French multinational Carrefour to own up to 49 percent of local subsidiaries.
The legislation would also include provisions for state governments to set local conditions for the groups, a move designed to head off opposition to the highly controversial legislation.
Last December, the left-leaning national government, which has struggled to pass reforms, was forced to withdraw a proposal to allow foreign supermarkets to own up to 51 percent of their local subsidiaries.
Shopkeepers, opposition parties and even an ally in the national coalition came together to oppose the change in the law, saying it would destroy the livelihoods of small business owners.
The government sees foreign supermarkets as a way to improve the food supply chain and bring down prices, but the proposed legislation as reported on Tuesday might not be enough to attract them.
Allowing state governments to set conditions locally would increase the complexity of the regulatory environment and the 49-percent ownership cap would mean the groups would not have control over their Indian operations.
Any proposed legislation would also need to pass the parliament, which was disrupted almost every day of the last session which ended last Friday.
Foreign retail groups are already allowed in India, but they must run single-brand shops.