Government likely to dilute FDI retail norms.

NEW DELHI: Within two months of allowing international players to set up wholly-owned 'single-brand' retail stores, the government is planning to dilute the norms on sourcing from small, village and cottage industries bowing to pressure from global brands such as IKEA, Nike and Apple.

Top government sources told TOI that the commerce & industry ministry has received feedback from these companies that they are unlikely to invest in India until the sourcing norms are simplified. Under the single-brand route companies can open their own stores provided they sell products under their own brand name.

For instance, during consultations in recent weeks, consultants for Nike have told the industry department officials that the sports goods and apparel major wanted to source from Indian firms, but they needed to invest in these entities to upgrade technology and scale up capacity. But pumping in money will result in a breach of the small scale cap of $1 million (around Rs 5 crore) investment in plant and machinery.

Similarly, government officials said that Apple too is keen on setting up its own stores and getting some manufacturing done in India, but the small scale investment cap is proving to be a deal-breaker.

Within weeks of the government notifying the norms on January 10, IKEA had said that it would be difficult for it to "live up to" some of the terms of the policy unveiled by the government.

"IKEA management is continuously in dialogue with authorities and other relevant stakeholders. This is true also for India as we are very positive to the decision to allow FDI for single brand retailers and remain optimistic that we will shortly be able to present more information about our possibilities to establish retail operations in India," an IKEA spokesperson said in response to a questionnaire from TOI sent last week.

In November, when the Union Cabinet had approved the proposal to permit an increase in the FDI cap for single-brand retail from 51% to 100%, the commerce & industry ministry had inserted a clause in the fine print to say that the small scale sourcing could be done from anywhere in the world.

Following the subsequent uproar, the ministry went back to the original position to specify in the notification that the sourcing clause would apply to "Indian small industries/ village and cottage industries, artisans and craftsmen".

The ministry of micro, small and medium enterprises has not been consulted on the issue so far, an official said. This is similar to the situation when the sourcing clause was announced without consulting the ministry. A commerce & industry ministry official said that the department intends to consult stakeholders over the next 45 days before deciding on revising the norms.

Source : timesofindia.indiatimes.com