Govt plans regulations for firms seeking investment sops

Experience with Apple has govt mulling over setting norms for providing investment benefits

The government is planning to set parameters for companies hoping to secure concessions such as tax breaks for investing in the country.

The decision comes after various ministries have been caught in a complicated debate over whether to provide US-based technology giant Apple concessions on their proposal to manufacture mobile phones in India.

On Wednesday, an inter-ministerial panel comprising senior officials from the revenue department, the Department of Industrial Policy and Promotion (DIPP) as well as from the Ministries of Electronics & Information Technology and Environment are set to meet senior Apple officials over the issue. However, this group of officials will also be responsible for setting up a comprehensive list of parameters that have to be satisfied by all companies in the future, a source in one of the ministries mentioned above told Business Standard.

The parameters currently under consideration include the amount of investments being brought in, the number of jobs being created as well the earlier established norm of rewarding companies bringing in modern technology.

Apple has asked for several tax benefits and other incentives, including long-term duty exemptions, to enter the manufacturing sector in India. However, various ministries have registered their disapproval with the DIPP over Apple receiving any special treatment. They have warned that this could create an unfair playing field as existing companies don’t get similar benefits. This might give rise to demands from such companies for retroactive measures by the government.

Also, the experience with Apple has proved that deliberating on major investment offers on a case-by-case basis unnecessarily drags the process of approving such proposals, another official said.

According to the current foreign direct investment (FDI) norms, 100 per cent foreign direct investment (FDI) is allowed in single-brand retail, although foreign retailers must obtain the approval of the FIPB if the FDI limit exceeds 49 per cent. Also, foreign entities that have “state-of-the-art” and “cutting-edge” technologies will get an exemption from the annual mandatory 30 per cent sourcing rule for the initial three years. Thereafter, in the next five years, the company will have to meet the domestic sourcing norm at an annualised average rate of 30 per cent.

Senior Commerce Ministry sources had earlier said Apple had sought exemption from mandatory local sourcing of products on the ground that it makes state-of-the-art and cutting-edge technology products for which local sourcing is not possible. Also, it had asked for the “creation of a suitable ecosystem”.

On Tuesday, Senior Vice-President for Operations at Apple Priya Balasubramaniam met Sitharaman to discuss the company’s plans to manufacture in India.

According to reports, Taiwan-based Winstron Corporation, an original device manufacturer, has initiated plans to assemble Apple phones in Bengaluru.