The new FDI rules governing single brand retail may not be good news for smartphone maker Apple, which has been seeking  an exemption from sourcing locally. 

Under the new rules announced by the Centre, there cannot be any waiver to the sourcing requirement. Apple will, however, get more time to comply with the requirement.

“It has now been decided to relax local sourcing norms up to three years and a relaxed sourcing regime for another five years for entities undertaking Single Brand Retail Trading of products having ‘state-of-art’ and ‘cutting edge’ technology,” said a press release from the Prime Minister's Office.

Though this may appear to be a relaxation, in reality it essentially means that no waiver will be given. “It appears that the entities engaged in trading of such products would now need to comply with the sourcing norms over a period of 8 years (3 plus 5) as against an earlier norm where the government had the option to completely waiving the sourcing norms for such entities. If this is indeed the case, this move would adversely impact the fate of several companies, especially in the technology space, that were hoping for a complete waiver on the grounds that the products proposed to be sold involved state-of-the-art technology,” said Kalpesh Maroo, Partner, BMR & Associates LLP

Under the earlier rule, the 30 per cent sourcing commitment was stipulated in single-brand retail but this could be waived if products involved ‘cutting-edge’ tech.

Apple had applied for an exclusion but the Centre was not in favour even though there is no definition of what constitutes ‘cutting edge’.

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