Ikea wants another tweak in sourcing norms; will the Modi govt oblige?

If you thought Swedish furniture retailer Ikea, which  got approval to set up shops in India two years ago, has decided to reconcile with the country’s much-debated single brand retail policy, think again. A report in The Times of India has said that the company has once again sought a leeway on sourcing requirements from the government. The company, which has planned Rs 10,000 crore investment in India, has requested the government to postpone the date for complying with the 30 percent local sourcing norm, the report says. It wants the date to be from the day it opens the first store, instead of the day its starts India operations. As per the norms for single brand retail, where 100 percent FDI is permitted, foreign companies need to source 30 percent of the products sold preferably from small and medium enterprises. The date for conforming to this norm will be 1 April of the year in which the company makes the first investment in the country. The company, which has planned 25 stores in India over a decade, in September signed a pact with Telengana to open its first store in Hyderabad. It is also working on setting up its stores in Mumbai, Delhi and Bengaluru in the initial phase. [caption id=“attachment_2094523” align=“alignleft” width=“380”] AFP[/caption] “This is an ongoing discussion with the Indian government and we believe it will turn out to be very positive for the country’s manufacturing sector in the long term,” a company spokesperson has been quoted as saying in the ToI report. The UPA government has once changed the sourcing norms earlier after its single brand FDI policy failed to attract any investment. The earlier guidelines had mandated that the companies should source from SMEs. In a slight tweak, the government added the word ‘preferably’ to make it easier for the companies to decide on sourcing. But the new government has said it is not considering any change in the policy yet. In August 2014, Commerce and Industry Minister Nirmala Sitharaman told Parliament during a question hour that the government is not considering any change in the sourcing policy. Meanwhile, a PTI report said that Ikea is considering increasing sourcing of items from India and widening its supplier base in the country. Ikea India is already sourcing large amount of textiles from India. It wants to double this to 630 million euro, for which it has devised a Make More in India programme. Ikea India executive officer Juvencio Maeztu who met Department of Industrial Policy and Promotion (DIPP) secretary Amitabh Kant on Wednesday briefed officials of the commerce and industry ministry about its business plans, said the PTI report. “We have shared our plans to make more (in India) and we are now in contact to increase our supplier base and we have great plans to develop all our production,” Maeztu told reporters after meeting Kant. Maeztu also said the company wanted to source more from India. “We are doing a lot of textiles and we are expanding to new categories,” he added. IKEA has around 50 suppliers in India. Ikea’s seems to be trying to cash in on the Narendra Modi government’s attempt to attract foreign capital and also revive the manufacturing sector in India through a Make in India campaign. The earlier UPA government dithered endlessly before giving approval for Ikea’s proposal. If it is lucky enough, the new government will disregard Seetharaman’s assurance in Parliament to ease up the process of doing business for single brand retailers. But then that will be another U-turn from the government.