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Govt relaxes mandatory 30% local sourcing norms; Win for Apple, Xiaomi & LeEco

FDI

India might soon have branded stores being set up by companies like Apple, LeEco and Xiaomi, which had earlier applied for exemption of local sourcing rules.

The government has relaxed FDI rule of mandatory 30% local sourcing for opening single brand retail stores for up to three years, and additionally up to five years if the brand proved that its products are “state-of-art and cutting edge’ technology, according to a PIB release. It also approved 100% FDI by default for DTH, Cable TV, HITS operators.

Apple’s seeks approval for opening single brand stores: During Apple CEO Tim Cook’s visit to India last month, he had announced that Apple is planning to set up three branded retail stores in India but wanted the government to drop the 30% local sourcing clause. The government didn’t agree to Apple’s request.

In April – a month before Cook’s visit — the company reportedly gave a detailed presentation to a committee headed by Department of Industrial Policy and Promotion (DIPP) secretary Ramesh Abhishek. But it could not provide enough proof to justify relaxing of local sourcing norms, an Indian Express report said. “Apple had to provide enough material on record to justify the relaxation, which they couldn’t,” an official told the publication.

Xiaomi’s withdraws request for relaxing local sourcing: In this month, Chinese smartphone maker Xiaomi, which had earlier applied for exemption of local sourcing rules  withdrew its request. A company spokesperson told us that it is in “constant discussion with the department for small clarifications, and have not met any major obstacles to date.”

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LeEco seeks FIPB approval: In April, Chinese smartphone maker LeEco had also filed an application with the Foreign Investment Promotion Board (FIPB), seeking approval for opening single brand retail shops and an e-commerce portal in India. Though no decision has been taken by DIPP, it sought more information from LeEco, according to an  Economic Times report.

FDI Norms: In November last year, the ministry of commerce had opened up foreign direct investment (FDI) in 15 sectors, which includes broadcasting sector, single brand retail, banking in the private sector. At that time, norms mandated that a foreign brand looking to open single brand retail stores in India must source at least 70% of its products in house, and 30% from Indian manufacturers. However, in case of ‘state-of-art’ and ‘cutting edge technology’ sourcing norms can be relaxed subject to government approval. The government also decided that an entity, which has been granted permission to undertake single brand retail, would be permitted to undertake ecommerce activities as well.

Image Credit: Flickr user Jake Rust under CC BY 2.0

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