Govt making room for MNCs? Apple, Ikea may get breather on labelling

Govt seems prepared to send out feelers that rules can be tweaked to make room for MNCs

Cupertino-based Apple Inc’s list of demands for starting to manufacture its products in India is long, and it is yet to set up a store in the country because of policy hurdles. But, the National Democratic Alliance government seems prepared to send out feelers that rules can be tweaked to make room for big-dollar investments from multinationals (MNCs). 

To begin with, changes are in the offing in the packaging rules to offer alternatives to mandatory price stickers on products. This follows a series of representations made by MNCs, including Apple and Swedish furnishing major Ikea, which found India-specific rule on price stickers and detailed product information on items an obstacle in their global way of doing business.

The Centre is willing to make changes in the (Packaged Commodities) Rules, 2011, due to concerns raised by global single-brand retail majors, it is learnt.

A top official in the government told Business Standard it is being done to help Make In India and ease of doing business initiatives — both signature campaigns started by Prime Minister Narendra Modi.

According to officials, several rounds of discussion on this have been held and the general consensus has been to allow the changes in the rules in the interest of consumers and companies alike.

One of the concessions that companies such as Ikea and Apple have been seeking is that they would not like to stick price tags on products to be in sync with their global practice.

Swedish furniture major Ikea, which has promised the largest foreign investment among single-brand retailers at $1.5 billion, has been, for some time, working with other companies in the European Business Group as well as with industry chambers in India, in an effort to get the labelling rules changed. Apple Chief Executive Officer Tim Cook, during his visit to India last year, is learnt to have spoken to the government on this issue too. 

Apple executives have, over the past few months, engaged with the government, seeking easier sourcing and taxation norms too. Currently, the Indian law requires that product details, including price, be printed on the packaging or on the product itself, but MNCs have asked that they should be allowed other ways to show the details of the product.

“When we have allowed MNC single-brand retail companies to set up businesses in India, there is no reason why this should not be allowed,” a senior official from the department of consumer affairs (DCA), the nodal ministry which handles ‘legal metrology’, told Business Standard.

He said MNC single-brand retail companies have global packaging and labelling standards and they might find it difficult to make local modifications. In an earlier conversation with Business Standard, Mikael Palmquist, retail president (Asia Pacific), Ikea, had said that labelling is one of the challenges they see in India.

“In a modern retail society, we can use phones to check prices on the website to maintain transparency. Labelling of items individually drives costs. We work with some of the international retailers and re-labelling that has to happen in India when the products enter this country is a concern,” Palmquist said. 

Maximum retail price (MRP) is something very unique to India, in most countries today they do not have MRP marked on each product, it is mostly on the shelf or the display product; there might be a barcode or online pricing, they do not stick a label on every product, he had added.

According to the DCA official, the Centre is also promoting the use of smart app through which a consumer can scan all the details of product, including its place of origin, make etc to facilitate sales. “If there is scope and we find any reason to make further changes, we are even ready to do that to facilitate the ease of doing business,” the official explained.

Ikea, in a statement, said they are open to providing digitised solutions to labelling in India. “Ikea sees a big opportunity in implementing modern ways of retailing in India, including digitised communication of product pricing in a transparent way. For example, presenting prices and product information through different channels.” This gives the consumer access to transparent information in a consistent manner and is aligned to how it operates across the globe, the company added. Apple, however, refused to comment on the issue. Soon after the foreign direct investment (FDI) cap was lifted in single-brand retail four years ago, Ikea had taken the lead to seek relaxation in sourcing norms. Subsequently, the government tweaked the norms to say that companies with FDI over 51 per cent would need to source 30 per cent of the products sold in India from the country, preferably from small and medium businesses. Before that, the norm mandated 30 per cent sourcing from Indian small and medium businesses.

As for labelling rules, analysts argued that labelling is essential as it conveys product information to the buyer. “MNCs need to understand the exact nature of labelling requirements in the country and not assume what is applicable in their country will be applicable in India as well,” Dhanraj Bhagat, partner, Grant Thornton India LLP, said.

Labelling norms that come unstuck for multinationals:

• Current rules are against Apple’s product aesthetics

• Tim Cook-led company keeps the surfaces free of labelling

• The US firm wants to provide product details as part of the software of the device or on packaging

• For Ikea, labelling of items individually drives costs

• Prices on the products sold by the Swedish furnishing firm is mostly on the shelf

• Ikea wants just a barcode, online pricing or shelf tag, as is the norm globally