The government is likely to modify the guidelines for FDI in single-brand retail to ensure that foreign retailers can have long term relationship with micro and small enterprises (MSEs).
The changes,according to sources,would address the concerns of the foreign retailers about 30 per cent mandatory sourcing of their requirements from MSEs even after they become big and lose MSE tag.
The government while increasing FDI in single-brand retail to 100 per cent has stipulated that the foreign companies should atleast procure 30 per cent of their requirements from MSEs.
International retailers,including IKEA have expressed concerns over the lack of clarity on this condition saying that under the present norms they would have to change the vendors once an MSE cross the plant and machinery investment limit of USD 1 million (about Rs 5 crore).
The foreign retailers have suggested that the condition should be modified so that they can continue to procure goods from the same vendor even after it loses its MSE tag.
“The clarification may feature in forthcoming FDI policy circular scheduled to be released on March 30,” the sources said.
According to Reliance Brands President and CEO Darshan Mehta India is a complex market and the restriction to source from villages and cottage industries would make it impossible for brands looking to enter India on their own.
Reliance Brands,a subsidiary of Mukesh Ambani-led Reliance Retail,has joint ventures or license arrangements with seven fashion and lifestyle brands,including Marks & Spencer,Diesel,Zegna,Timberland and Paul & Shark.