Local sourcing relaxed for single-brand retail; Apple to gain

Paving way for iPhone maker Apple to open its own stores India, the government today relaxed FDI norms by giving a three-year exemption from local sourcing to foreign players in single-brand retail and a further five-year relaxation for 'state-of-art' and 'cutting-edge' technology.
Apple has been lobbying hard for the exemption from the mandatory 30 per cent local sourcing on the grounds that its products have such high-end technology and were therefore could not be sourced locally here.
The US-based technology giant, whose global CEO Tim Cook was recently in India and had discussed possibilities of manufacturing and retailing here during his meeting with Prime Minister Narendra Modi, will have to apply afresh for opening single-brand retail stores here as per the new guidelines.

Announcing a slew of FDI reforms, the government today said, "It has now been decided to relax local sourcing norms up to three years and a relaxed sourcing regime for another five years for entities undertaking single brand retail trading of products having 'state-of-art and 'cutting edge' technology."
The relaxation is expected to help Apple, which also makes iPads, Mac computers and iPod music players, as it would be able to get the relaxation for up to 8 years if its products are accepted by the government to have such high-end technology.
Besides Apple, which is said to have been seeking a blanket exemption and not for three or five years, several other foreign retailers may also benefit from the relaxation.

The existing Foreign Direct Investment (FDI) policy has a provision under which the government could relax sourcing norms for entities undertaking single brand retail trading of products having such top-end technology and where local sourcing is not possible.

The decision to relax the norms was taken at a high-level meeting chaired by Modi today.
Earlier, Apple had submitted an application seeking exemption to open single-brand retail stores, after which a DIPP Secretary-headed panel recommended that the company could be considered for the relaxation, but the Finance Ministry rejected the suggestion.
When asked whether Apple Inc will have to apply afresh, Commerce and Industry Minister Nirmala Sitahraman said: "With this policy coming out now, I would presume, obviously (they will have to)".

Replying to a similar question, Department of Industrial Policy and Promotion (DIPP) Secretary Ramesh Abhishek said the company would be informed about the changes.
"We will inform Apple Inc to indicate whether they would like to avail the new provisions," he told reporters here.
Earlier, Apple had filed its proposal seeking permission for single brand retailing and sell its products online.
At present, 100 per cent FDI is permitted in single-brand retail, but FIPB permission is required beyond 49 per cent.
Apple sells its products through Apple-owned retail stores in several countries, including China, Germany, the US, the UK and France.

But, it has no wholly-owned store in India and sells its products here through distributors such as Redington and Ingram Micro.