DIPP rules out policy changes in single-brand retail

The Department of Industrial Policy and Promotion (DIPP) has ruled out policy changes in single-brand retail, although it has left it to the FIPB to take a final call in the wake of Swedish furniture retailer IKEA seeking relaxation of sourcing norms.

The DIPP is understood to have asked IKEA as to why the sourcing period should be calculated for 10 years and not shorter than that. "It won't be a policy change," a senior DIPP official said when asked if the department was planning to change policy for single brand retail. Stating that DIPP had written to the company a week back, the official said: "Let's have the response from the company and then we will suggest it to the FIPB. It is a test case for us and FIPB will take a final call on this. When dealing with something new, we need to understand why they are asking for it." IKEA had asked the government to give a time period of 10 years to fulfill the mandatory condition of sourcing 30% of products from small industries. The official further said the department wanted a clarification from IKEA as to why the sourcing criteria must be met in a period of ten years and not shorter? "Is it an ideal period? Normally presumption is year- to-year," the official said. FIPB will decide whether the time period for sourcing should be two years or five years, the official added. As per the present policy, for 100% FDI in single brand retail, global firms would have to source 30% of their requirement from Indian small industries which have a total investment in plant and machinery not exceeding USD 1 million. IKEA, which has proposed to invest Rs 10,500 crore to set up single brand retail stores in India, had asked the government that it must be allowed to continue sourcing from small units even after the vendors have crossed the mandatory USD one million investment limit.