Govt may tweak sourcing clause in single brand retail

11 Jun '16

2 min read

High-tech companies like Apple Inc. may be given more time to comply with the government's domestic sourcing norms for opening single-brand retail stores in the country.

Last year the government had said that it may relax the mandatory local sourcing norms for entities undertaking single-brand retailing of products having state-of-the-art and cutting edge technology and where local sourcing is not possible.

Officials say the government does not want to dilute the mandatory 30 per cent local sourcing norm but is open to the possibility of giving more time to such firms.

"The Department of Industrial Policy and Promotion (DIPP) is looking to tweak the FDI policy on sourcing. Thirty per cent local sourcing norm may not be changed, but the time given to comply might be relaxed," a finance ministry official said.

The local sourcing norm has become a bone of contention between the Commerce and Industry Ministry and the Finance Ministry. While the Commerce Ministry has recommended that Apple Inc be exempted from this rule, the Finance Ministry has rejected it.

Currently, 100 per cent FDI is permitted in single-brand retail sector but companies are required to take FIPB permission if the limit exceeds 49 per cent.

In respect of proposals involving foreign investment beyond 51 per cent, sourcing of 30 per cent of the value of goods purchased, will be done from India, preferably from MSMEs, village and cottage industries, artisans and craftsmen, in all sectors.

According to the FDI policy, the sourcing requirement would have to be met, in the first instance, as an average of five years' total value of the goods purchased, beginning April 1 of the year of the commencement of the business i.e. opening of the first store. Thereafter, it would have to be met on an annual basis. (SH)

Fibre2Fashion News Desk – India

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