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India today said it is working on revising the definition of small and medium enterprises to help them meet the MSME criteria while catering to foreign retail players.
IKEA, world’s largest furniture maker, which proposes to undertake large investments in India, has demanded flexibility in the clause that makes it mandatory for retailers to source 30 per cent of their inputs from domestic small and medium enterprises.
“Once the Indian SMEs are engaged with them, the definition will require a change because you have a SME and you have global majors taking from you. So when you are selling this kind of material to a global major, then you may not remain a SME under the present definition,” Commerce and Industry Minister Anand Sharma told reporters here
“In one year, you may double revenue and profit, so therefore a definition... it is a continuous process, it has to keep on evolving. The concerned department will discuss and change...,” he said.
SMEs are defined as enterprises that have invested up to $1 million in plant and machinery. IKEA has said that it should be allowed to continue sourcing from its vendors even after they cross the $1-million investment limit.
In June, IKEA had filled the application with the Department of Industrial Promotion and Policy and had said if the group were to comply with this norm, such units will very soon outgrow the stipulated valuation (of $1 million) and become large set-ups.
The retailer has also demanded that the 30 per cent domestic sourcing limit should be viewed for a cumulative period of 10 years of operation.
“The guidelines will have absolute clarity. The Department of Industry Policy and Promotion (DIPP) is currently working on guidelines,” Sharma said.
“What I am saying is you cannot punish a SME for performing well because next year they will not be able to sell and become unproductive SMEs after two years,” Sharma said.
Earlier this year, India hiked the FDI cap in single-brand retail to 100 per cent from 51 per cent, subject to the domestic sourcing clause.
Following this, it received application from the UK-based show company Pavers England and Swedish home products IKEA.
IKEA has proposed to invest Rs 10,500 crore to set up single brand retail stores in India.
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