Single Brand FDI Norms: DIPP considers alterations

Friday, 29 June 2012

In response to a request by the IKEA wanting certain changes in the single brand FDI policy, the Department of Industrial Policy and Promotion (DIPP) has said that since the issues raised seem to be practical in nature, it would consider some alterations in the policy. A senior DIPP official said that the department will address these issues in general and look into the matter to the possible extent.

Currently, the single brand FDI policy says that it is mandatory for global retailers to have 30 per cent of their requirement sourced from Indian small industries having a total investment in plant and machinery not exceeding USD one million. The issue came to light after Swedish firm IKEA, which plans to invest Rs 10,500 crores to set up single brand retail stores in India requested the government to grant permission to continue sourcing from small units even after the mandatory US$1 million investment limit is crossed. It also requested that the calculation of 30 per cent norm to be done for a cumulative period of 10 years of operations.

IKEA had also highlighted that in the due course of its tie-ups with smaller units, the Indian firms would transform into large set-ups and therefore cross the stipulated valuation of US$1 million. Moreover, if this happens, then IKEA will be forced to look out for other smaller firms which will result in small industries losing out on vast volumes of business from the group. It could even lead to closing down of such units leaving hundreds of employees jobless. Also, abrupt change of vendors will hamper the quality of the products that would be released in the market and also the supply chain operations of IKEA group.