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Sourcing clause on retail FDI well thought out: Sharma

Press Trust of India  |  New Delhi 

The government today virtually ruled out revisiting the condition on sourcing in 100% FDI in single-brand retail, stating that the decision on 30% mandatory procurement from the domestic small enterprises is well thought out.

"I think, it is a well-considered policy and surely sourcing from within the country and small and medium units is something which is very healthy. It would only be the experience which will tell how rewarding it will be for the investors and the small enterprises," Commerce and Industry Minister Anand Sharma said.

He was talking to reporters on sidelines of a TERI function here.

Sharma made these comments a day after he met CEO of Swedish furniture IKEA Mikael Ohlsson in Paris.

According to a Commerce Ministry statement, Ohlsson had shared his views on the local sourcing clause in the FDI policy with regard to single-brand retail.

IKEA has already stated that the sourcing clause might be difficult to implement.

Earlier, in January, the government had notified opening of 100% FDI in single-brand retail, with a clause that in case foreign ownership increases beyond 51%, 30% local sourcing from the small units would be mandatory.

Apprehensions have been expressed on the rule since in several areas, the domestic small vendors may not have the required skill and and capabilities to be suppliers of global scale in terms of capacity and quality.

A unit is considered small if its investment in plant and machinery is not beyond Rs five crore.

The government has been forced to put on hold its Decision of November 24 to open FDI in multi-brand retail, following political opposition and Trinamool Congress, a key ally of the ruling UPA.

First Published: Wed, February 01 2012. 19:41 IST