Global retailers getting into fine print fail to impress DIPP

Global retailers are getting into smaller details such as demanding that they be allowed to procure items like bread and locks from big domestic companies under the mandatory 30% sourcing norms in multi-brand segment, but DIPP is having none of that.

     
The retailers looking at Indian market have argued that items such as bread and locks are manufactured originally by small units in India. The big domestic firms source it from them to sell it under their brand names.

     
"The retailers are going into smallest of the details. They want to buy bread and locks from big firms like Britannia and Godrej respectively and want that to include into the mandatory sourcing," said an official in the Commerce and Industry Ministry.

   
 Yet, the DIPP is having none of it and insists that the multi-brand retailers have to strictly comply with the norms.

   
 "We can not allow that. They have to buy that from small industries only," the official said.

     
As per the foreign direct investment (FDI) policy for multi-brand retail trading, at least 30% of the value of procurement of manufactured/processed products shall be sourced from Indian 'small industries'.

     
According to industry sources, retailers have argued that they could not procure such products from small industries due to standard and quality issues.

     
The government, however, sees it as just another excuse saying foreign automobile companies have invested in small units in India to produce world class components.

     
"In a similar way, the global retailers can do," the official added.

     
When contacted to Walmart India spokeswoman said: "We continue to work with the Government of India to better understand the rules that exist for foreign direct investment and we appreciate the government's willingness to consider our requests for clarity on conditions contained in the new FDI policy".

     
A Tesco spokesperson said: "We have sought clarification over the FDI policy in multi-brand retail and we are awaiting to hear from the government."

     
Several global retailers have raised their concerns over the sourcing restriction.

     
In a meeting with Commerce and Industry Minister Anand Sharma, the global chains have flagged the issue and have demanded to alter the condition to 'preferably' from 'mandatory' as in the case of single brand retail.

     
Although the government has permitted 51% FDI in multi-brand retail about ten months back, no formal proposal has been received by the DIPP yet.