Govt retains sourcing clause for single brand retailers

Bindu D Menon New Delhi | Updated on April 12, 2012 Published on April 10, 2012

There has been no change in the 30 per cent sourcing clause for single brand retailers, contrary to reports that Government may tweak it.

In the consolidated FDI policy released on Tuesday, the Government has, however, brought e-commerce activities – especially B2B – also under the purview of domestic trading. The policy said that existing restrictions on FDI in domestic trading would be applicable to e-commerce as well.

While allowing 100 per cent in single brand retail, the government has retained the contentious clause that requires any company investing more than 51 per cent to source 30 per cent of the value of its products sold from Indian small and medium-scale enterprises.

Companies especially in the luxury retailing category are apprehensive about the sourcing clause.

Mr Abhay Gupta, CEO and founder, Luxury Connect, a retail consultancy and former MD of Blues Clothing Company, said, “Companies like Ikea and Nike have raised concern on the sourcing clause. Every brand would like to go alone but this is a major bottleneck as it is difficult to find expertise among small vendors. Also companies will have to go to more suppliers so that they are less than $1 million. This will create supply chain inconsistencies.”

Echoing the view, Mr Arvind Singhal, Chairman, Technopak, said, “This condition ( on sourcing) is highly impractical and illogical. Big brands entering India would not like to source from SME players as they cannot match up to the standards of global retailers. We believe that the Government cannot force this condition on brands wishing to scale up in India.”

Published on April 10, 2012
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