The Department of Industrial Policy and Promotion (DIPP) could be effecting changes in the policy for foreign direct investment (FDI) in single-brand retail to attract foreign investors like Swedish furniture giant IKEA, but it is learnt the Ministry of Micro, Small and Medium Enterprises (MSME) is not part of that process.
A senior MSME official told Business Standard, “We are not in dialogue with DIPP for changes in the single-brand retail FDI policy.” This is despite foreign retailers opposing the government’s condition that they would have to source at least 30 per cent of the value from small and medium enterprises in the country. The ministry has been resisting any dilution of the sourcing clause.
When asked about the ministry’s stand on the likely changes in the policy for FDI in single-brand retail, the official said, “It is up to DIPP to take a call. DIPP has not approached us….I’m sure DIPP will approach us in due time.” He refused to comment on the concern raised by investors such as IKEA over the mandatory sourcing norm, adding he had only read about the issue in newspapers.
| NUTS AND BOLTS |
Source: IKEA, industry |
On the 30 per cent sourcing norm and concern raised by IKEA, Commerce & Industry Minister Anand Sharma had recently said whenever clarity and rationalisation were required in the single-brand retail policy, the government would be open to redressing issues.
On June 22, IKEA had proposed to DIPP a 100 per cent controlled single-brand retail business in India. The company plans to invest^1.5 billion (Rs 10,500 crore) over 15 to 20 years to set up 25 stores in the country.
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Earlier, the company had tried to foray into India under the 51 per cent single-brand FDI norm, but later decided it would enter the country on its own, once the rules were relaxed. However, in a surprise move, on the sidelines of a meeting in St Petersburg (Russia) last month, the company announced its plan to invest in India.
Mikael Ohlsson, president and chief executive of IKEA, had earlier said the company would be unable to comply with the sourcing norm, adding the rulebook suited food retailers, not a chain with a global product range.
When IKEA had sent an application to DIPP last month, a company spokesperson had said, “The challenge related to 30 per cent sourcing remains.” The company wants the government to review the condition, arguing even if it begins sourcing from a small-scale sector unit, in time, the unit’s revenue would grow beyond the definition of an MSME.