| Date: |
10-07-2012 |
| Subject: |
Govt unlikely to dilute FDI policy for single-brand retail |
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The government may not dilute the foreign direct investment (FDI) policy for single-brand retail but is likely to accommodate the demands of Swedish home furnishing major IKEA through guidelines issued by the foreign investment promotion board (FIPB).
According to a government official, the department of industrial policy and promotion (DIPP) is awaiting clarification from the Swedish major on various issues, including the proposed 10-year gestation period for sourcing 30 per cent requirement from small and medium enterprises, self-certification by own auditors, details of ownership between the applicant and the brand owner, which, in its case are different entities.
The DIPP had sought clarity on the issue on July 3. The official said that since IKEA is a “test case” for the government, the department is also studying the business model of 59 other cases of single-brand retail. Based on these case studies, the department will form its view on proposal put forward by the furnishing company.
“However, we are not looking at any change in policy. We will send our views to FIPB and it may issue guidelines clarifying many of the issues IKEA has raised,” the official added. However, the official clarified that the decision taken will not be IKEA-specific.
Earlier, IKEA had applied to the FIPB to set up a single-brand retail chain with an investment of euro 1.5 billion for setting up 25 stores.
However, in its application, IKEA proposed that the sourcing amount be considered over cumulative periods of 10 years each from the date of approval of its application. It demanded inclusion of value of exports from small scale units in complying with sourcing norms.
“We are waiting for IKEA’s response and then will finalise our comments... We have to look into IKEA’s demand of why they want 10 years, why not a shorter period. We are deciding on whether to start the sourcing condition from first year or ramp up sourcing year by year,” the official said.
Source : indianexpress.com
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