The government responded to apprehensions expressed by Tesla founder Elon Musk that the company would have to source a certain percentage of local components to set up plant here.
The commerce and industry ministry through its 'Make in India' Twitter handle stated that the foreign direct investment (FDI) policy does not mandate any such minimum sourcing of components by manufacturers.
As per the policy, after manufacturing in India, a foreign investor is permitted to sell its products in any manner - wholesale, retail or e-commerce.
It is only for retail trading of goods that sourcing conditions are mandated. Such norms are not applicable to manufacturers as goods are produced in India, it added
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Musk in his tweet has said: "Maybe I'm misinformed, but I was told that 30 per cent of parts must be locally sourced and the supply doesn't yet exist in India to support that".
Last year in April, the company had stated that it planned to enter India with its Model 3 in 2017.
In a visit to the company's plant last year, Minister of Road, Transport and Highways Nitin Gadkari had offered Tesla land near major Indian ports to facilitate exports to South and South East Asian countries while asking the company to make India its Asia manufacturing hub.
If a foreign company wants to open wholly-owned single brand retail stores in India, it has to mandatorily source 30 per cent of the value of goods from India.
When asked about the matter, Commerce and Industry Minister Nirmala Sitharaman said that a clarification has been tweeted.
She said that sourcing requirement is related to the retailing and not for manufacturing in India.