Govt rules out easing of sourcing norms for single brand retail

Ruling out relaxation of the mandatory sourcing norm for global retailers who want to set up stores in India, the government said companies have to procure 30 percent of their merchandise requirement from domestic small industries.

“We are not talking of any dilution. We are talking of clarity…We are very clear that 30 percent of the sourcing has to be from India primarily from micro, small and medium enterprises,” Commerce and Industry Minister Anand Sharma said on Tuesday.

The minister’s statement assumes significance as Swedish furniture retailer IKEA, which has proposed to invest Rs 10,500 crore up single brand retail stores in India, had sought tweaking of certain clauses related to the 30 percent mandatory sourcing norms.

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Sharma, however, said that the government would issue some guidelines about 100 percent foreign direct investment (FDI) in single brand retail. “To come up with the policy, the guidelines will follow for greater clarity.

Policy is meant to attract investments. As long as the sourcing is from India, I am not going to get into any quarrel over technicalities,” he said.

The minister said that major retailers in the single brand are already sourcing from India. Swedish home furnishing major IKEA source products worth 1 billion euros from India and mainly from handloom and carpet clusters, he said.

As per the present single brand FDI policy, global retailers would have to source 30 percent of their requirement from Indian small industries which have a total investment in plant and machinery not exceeding $1 million.

He also said: “Cabinet decision is taken and if there is any clarity required we will do that. If we feel that there is a need of clarity to ensure that their investments are facilitated we will do that”. IKEA has asked the government that it must be allowed to continue sourcing from small units even after the vendors have crossed the mandatory $one million investment limit.

It has also proposed that the calculation of the 30 percent norm be done for cumulative periods of 10 years of operations starting with the approval of the present application. It has said that if IKEA group were to comply with this norm, such units will very soon outgrow the stipulated valuation (of $1 million) and become large set-ups.

Owing to the restriction contained in the FDI policy, such small industries may lose out on vast volumes of business from the Group, it has said. According to industry experts, brands like Apple and Rolex may not be able to meet the mandatory sourcing requirements.

PTI