Government spikes Flemingo plan to sell goods locally

The government has turned down a proposal from the Dubai-based Flemingo International to sell its unsold stocks at duty-free shops to hotels and diplomats or re-export them.

It has sought clarification from the company since allowing any such sale may amount to selling in the domestic tariff area (DTA) which is not permissible to the company under the current rules.

The company had been given permission to sell goods in duty-free shops provided the sales were in the custom-bonded area and not DTA. Issuing licence for such activities is within the powers and jurisdiction of the assistant or deputy commissioner of customs but the company sought the government permission for sales to individuals.

The finance ministry in its comments on the company's request pointed out that such sales would tantamount to domestic retail trading which is not permitted as per the present Foreign Direct Investment (FDI) policy.

While 100 per cent FDI is allowed in trading activities under the Foreign Investment Promotion Board (FIPB) route, domestic retailing is not permitted.

The company is already operating several duty free shops and custom bonded warehouses. However, the company had sought permission to sell other bonders or persons entitled to buy duty-free goods, such as hotels and diplomats, in order to liquidate its inventory and save foreign exchange.

Thai company Lo Ting Kwuang Company has been permitted to establish a wholly owned subsidiary for investment of up to $1 million to sell bedding and soft furnishings through wholesale and cash and carry trading activity, and export-import. But it has not been allowed to establish "Lotus boutiques".

The company had sought permission to establish Lotus boutiques across India to showcase the exclusive line of bedding and soft furnishing products.

The Department of Commerce and the Department of Industrial Policy and Promotion objected to the setting up of the boutiques as it would tantamount to local retail sales which is not permitted under the present policy.

A proposal to set up a joint venture company in the name of Jajoba Oil Industries to undertake Jojoba plantation and oil extraction for Jojoba carnal has also been rejected by the government on the grounds that FDI is not allowed in any agriculture sector barring tea plantation.

The JV comprised a non-resident Indian (NRI) equity of 90 per cent by two NRIs from the US and Narendra Singh Chavda, an Indian promoter contributing the remaining 10 per cent.

The agriculture ministry pointed out that since the proposal pertained to a horticulture sector, it could be cleared by the government. However the Finance Ministry was of the view that the agriculture ministry should re-consider the proposal from the policy angle.