NITI Aayog chief wants sourcing norms eased for single-brand retail: report

In a move that would make doing business in India further attractive for companies such as Apple and Ikea, Amitabh Kant the chief executive officer of the government's new planning body, NITI Aayog, is reported to have recommended to Prime Minister Narendra Modi that the mandatory domestic sourcing norms for single-brand retail entities with foreign direct investment (FDI) beyond 51 per cent be eased.

The proposal favours lowering the threshold of domestic sourcing from 30 per cent of purchase value of products sold for five years to 15 per cent, in order to make it more attractive for investors.

Kant also batted for a tradeoff between domestic sourcing for global operations by foreign investors and domestic sourcing requirements, ie, if a retailer sources 15 per cent of goods locally for global sales the 15 per cent sourcing requirement also should be waived.

This is among several other proposals discussed at a meeting at the PMO last week, a Hindu BusinessLine report said.

The existing policy already provides leeway for investors by spreading the 30 per cent sourcing obligation over a five year period – that the retailer does not have to source 30 per cent of each year's sales as it allows for compounding of sales in the first five years of operation.

To attract big foreign companies such as Apple, the government had done away with domestic sourcing norms for those producing ''cutting-edge products'', but in June this year, the exemption period was restricted to three years.

It may be noted that Apple had applied for exemption under the ''cutting-edge product'' category earlier this year when a blanket exemption on local sourcing was allowed. However, the finance ministry refused to accept the company's argument and rejected its application. Apple did not bother to submit a fresh application under the new rules.

Apple is not alone with ''cutting-edge Technologies'' to do business in India, there are others like Acer, Lenovo (India), Le Ecosystem Technology (LeEco), and OPPO Mobiles, which have had applied for relaxation of local sourcing norms.

The proposed relaxation will, if approved, apply to all single-brand retailers, irrespective of whether or not their technologies qualify as 'cutting-edge' or not.

But as Maruti Suzuki India chairman RC Bhargava said, ''It doesn't help to give a concession for the sake of giving one. It makes sense if that is the only way to profitability.''