IKEA would like 'less detailed regulations'

Company says it would do whatever it takes to meet the 30% sourcing requirements in India for operating its retail chain

Amid a debate over local sourcing conditions for foreign firms to open retail stores in India, Swedish furniture major IKEA says it is better to have “less detailed regulations”, as business will eventually go to the place that has the best preconditions.

The company, slated to open its first store in India next year, however, said it would do whatever it takes to meet the 30 per cent sourcing requirements in India for operating its retail chain.

“I am happy about the development which India has taken to enable retailers like us to establish ourself in India, and you have a 30 per cent rule for sourcing. We will do whatever, of course, to fulfil that. We see many opportunities that will be good for IKEA and good for India,” group president and chief executive officer Peter Agnefjäll told PTI.

Asked if the sourcing conditions were reasonable, he said: “At the end of day, it’s better for the world, for more freedom of trade we can have and with less detailed regulations, because then the business would end up where you actually have the best preconditions to do so.”

Elaborating: “For instance, textiles, which is super strong in India and not so good in Sweden, it’s better that we actually do it (source) in India for more countries and we will do something else in Sweden.”

However, accepting India’s preconditions, he said: “Regulations are what regulations are and we have accepted these and will make sure that we will fulfil the requirements, set up by the Indian government.”

Currently, a debate is on over relaxing local sourcing requirements for Apple Inc with India’s Foreign Investment Promotion Board, writing to the department of industrial policy and promotion to relax the sourcing requirement for foreign-funded single-brand retailers, selling products with “cutting-edge” technology.

Agnefjäll said IKEA had agreed that five years from store opening in India, it would fulfil requirements and “that’s the target set on which we are working upon”.

He said initially it was “little bit unclear on whether it counts from store opening or from the time you establish the company”.

“For us, it is important it goes from store opening because we have a very long lead time, as we are securing the land, which needs to be prepared, have a building permit etc, before you can construct the store,” Agnefjäll said.

He, however, welcomed the steps taken by the Indian government to enable the company to set up shops in the country.

IKEA will open its first store in India at Hyderabad in the second half of 2017. It has also bought land in Mumbai and it scouting for more sites in National Capital Region and Bengaluru.

The company, which received government approval in 2013 for a Rs 10,500-crore proposal to open retail stores under 100 per cent foreign direct investment, plans to open 25 stores by 2025 in nine cities.