Companies

NITI Aayog pitches for easing single-brand retail sourcing norms

S Ronendra Singh New Delhi | Updated on January 15, 2018 Published on November 04, 2016

The proposal could, if implemented, make it more attractive for companies such as Apple and Ikea to do business in India

Proposes 15% domestic sourcing, down from 30%

NITI Aayog Chief Executive Officer Amitabh Kant has proposed to Prime Minister Narendra Modi that the mandatory domestic sourcing norms for single-brand retail entities with foreign direct investment (FDI) beyond 51 per cent be eased.

The proposal, which favours lowering the threshold of domestic sourcing from 30 per cent of purchase value of products sold for five years to 15 per cent, could, if implemented, make it more attractive for companies such as Apple and Ikea to do business in India.

Kant has also proposed that domestic sourcing for global operations by foreign investors be allowed to be set off against domestic sourcing requirements.

“There was a meeting at the PMO last week and a lot of proposals were discussed, including diluting souring norms for single-brand retail,” a government official told BusinessLine.

Under the existing policy, for the first five years of their operation, the entities do not have to meet their 30 per cent domestic sourcing obligations annually, but as an average of five years.

To attract big foreign companies such as Apple, the government had done away with domestic sourcing norms for those producing “cutting-edge products”, but in June this year, the exemption period was restricted to three years.

Apple had applied for exemption under the “cutting-edge product” category earlier this year when a blanket exemption on local sourcing was allowed. However, after its application was rejected by the Finance Ministry, Apple did not bother to re-apply under the new rules.

Four others, including Acer, Lenovo (India), Le Ecosystem Technology (LeEco), and OPPO Mobiles, had applied for relaxation of local sourcing norms.

The proposed relaxation will, if approved, apply to all single-brand retailers, irrespective of whether or not they qualify as ‘cutting-edge’ or not.

According to RC Bhargava, Chairman of Maruti Suzuki India, companies like Apple would invest in India only if there is a path to profitability.

“Ultimately, whoever invests in anything – electronics or manufacturing – will come only if manufacturing in India is competitive and profitable,” he said.

“It doesn’t help to give a concession for the sake of giving one. It makes sense if that is the only way to profitability,” Bhargava said.

(With inputs from Amiti Sen)

Published on November 04, 2016
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