CCEA relaxes sourcing norms for 100 % FDI in single brand retail trading
15 Sep 2012
The CCEA has relaxed the 30-per cent sourcing requirement in foreign direct investment (FDI) in single-brand retail above 51 per cent by allowing allowing investors the option to make the 30-per cent sourcing from any domestic source, thus removing the compulsion of sourcing from MSMEs, village and cottage industries, artisans and craftsmen, in all sectors.
CCEA also approved single brand product retail trading by a non-resident entity other than the owner of the brand, through a legally tenable agreement with the brand owner.
The onus for ensuring compliance with this condition will rest on the Indian entity carrying out single-brand retail trading (SBRT) in India. The investing entity should provide evidence to this effect at the time of seeking approval, including a copy of the licensing / franchise / sub-licence agreement, specifically indicating compliance with the above condition.
"For proposals involving FDI beyond 51 per cent, sourcing of 30 per cent of the value of goods purchased will be done from India, preferably from MSMEs, village and cottage industries, artisans and craftsmen, in all sectors, where it is feasible," an official release said on Friday.
Also, the quantum of domestic sourcing will be self-certified by the company, to be subsequently checked by statutory auditors from the duly certified accounts, which the company will be required to maintain. For ascertaining the sourcing requirement, the relevant entity would be the company, incorporated in India, which is the recipient of FDI for the purpose of carrying out single-brand product retail trading.
Amendment in the condition relating to brand-ownership has been felt necessary in view of the fact that globally single brand retailers often adopt a variety of business models, wherein the brand owning entity and investor entities are kept separate, even though in some cases, they may be having the same parent, the release noted.
