Swedish home furnishings major IKEA today said it has not been asked by the Indian government to re-apply for entering the market through single brand FDI route following the relaxation of sourcing norms.
However,according to a senior government official,the firm would have to revise its application and re-apply after the tweaking of mandatory sourcing norms for FDI in single brand retail.
“We have not been asked to re-apply. The (Indian) government had asked for some clarifications in July and we will send our response as soon as we have done our internal evaluations,which are on-going at the moment,” an IKEA spokeswoman said.
In June,IKEA had applied to the government with its plans to invest 1.5 billion euro (Rs 10,500 crore) in India to set up 25 stores.
“We are waiting for the government to go through the approval process. Regarding the policy revision announcement on Friday,we will now look into the details of this decision of the Indian government,” she added.
However,a senior government official had earlier this week said: “The Department of Industrial Policy and Promotion (DIPP) is in continuous discussion with IKEA… The government has relaxed some norms. So they have to submit a revised application after the Cabinet’s decision.”
Last week,the government had tweaked sourcing norms for FDI exceeding 51 per cent in single-brand retail and diluted the previous condition to source 30 per cent of requirements “mandatorily” from micro,small and medium enterprises (MSMEs) in India,by stating that sourcing should be done “preferably from MSMEs”.
This was one of the major issues raised by IKEA while approaching the government. It had said that “the conditions applied to local sourcing from SMEs might be difficult for it to live up to”.
It had also proposed that adherence to the mandatory sourcing requirement must be on the basis of cumulative periods of 10 years each from the date of approval.
As part of the modifications announced last week,the government had said foreign firms,which want a relaxation of the 30 per cent procurement norms,would have to set up manufacturing facility in India.
Reacting to government’s decision to relax FDI norms in retail sector,IKEA had said it would open stores in India only after its application is approved in entirety.
In June IKEA proposed to invest 600 million euro (Rs 4,200 crore) in opening 10 stores in the first stage. The remaining 900 million euros (Rs 6,300 crore) was to be used to open 15 more stores.
Besides,it had also proposed to set up restaurants,food mart,nursing homes and publications under its brand name.