FIPB clears IKEA's store-cum-cafeteria FDI proposal

The Foreign Investment Promotion Board (FIPB ) today cleared a $2 billion investment proposal by Swedish furniture major IKEA to set up wholly-owned retail stores with cafeterias in the country.

"The proposal will now be placed before the Cabinet Committee on Economic Affairs (CCEA) for final approval," economic affairs secretary Arvind Mayaram said.

The board had partly cleared the furniture giant's proposal in November subject to certain conditions. However, IKEA had objected to the conditions that prevented it from selling unbranded products, including secondhand furniture, textile goods, toys, books and consumer electronics as well as food and beverage items in cafeterias within its stores.

The proposal has now been approved in its entirety, according to official sources.

IKEA now needs the approval of the union cabinet to set up its outlets in the country.

FIPB has to forward all promotion investment proposals worth over Rs1,200 crore (about $219 million) to the union cabinet.

"IKEA's case for investment is cleared, which is a positive development. The government is committed to playing a constructive role in enhancing FDI, especially in areas which create jobs and provide technological enhancement," commerce minister Anand Sharma said.

The government had earlier ruled that the furniture maker would not be allowed to sell items such as food, textile products and office supplies under the single-brand retail format.

IKEA Group, which manufactures and sells home and office furnishing products, proposes to invest in single-brand retail trading in India through a 100 per cent subsidiary.

FIPB withdrew the Swedish furniture major's proposal from the agenda of its 31 December meeting as the finance ministry sought more information from the company regarding its FDI plans in India.

The FIPB, headed by Mayaram, had, on 20 November, submitted its recommendation to the cabinet committee on economic affairs (CCEA) for permission for IKEA to invest Rs4,200 crore opening single-brand retail outlets for its products in India.

IKEA, which had planned to invest Rs10,500 crore in India, including in cafeterias inside its furniture stores, is not satisfied with the partial approval. It insists that cafeterias are an integral part of its business model, from which it will not deviate.

Following a representation from the Swedish firm, the Department of Industrial Policy and Promotion (DIPP) requested the FIPB to review its decision to give only part approval to IKEA's plan.