FDI in retail: Not consulted on single brand IKEA FDI move, says MSME ministry

NEW DELHI: Global single brand retailers like IKEA may find it tough to get easing of norms for compulsory sourcing from the Indian tiny and small units, with the Ministry of MSME strongly opposing the move of the Commerce and Industry Ministry.

"I am opposed (to it) if you will say that you will not procure 30 per cent from India and will procure everything from abroad," Additional Secretary in the MSME Ministry Amarendra Sinha said on the sidelines of a function jointly organised by software provider INTUIT and the ministry here.

The government has eliminated 51 per cent cap on foreign direct investment ( FDI) for single brand retailers like IKEA, Adidas, Louis Vuitton and Gucci.

However,those opting for taking FDI beyond 51 per cent will have to source at least 30 per cent of their merchandise from the domestic micro and small enterprises.

While Swedish furniture firm IKEA has moved its application for raising FDI up to 100 per cent, it has sought from the government easing of norms for compulsory procurement from the micro and small enterprises (MSEs). At present, a company up to investment of Rs five crore qualifies to be called MSE.

The IKEA arguement is that once big time orders are placed on domestic entities, they will have to expand capacity and pump in more investment and thus would not remain the MSEs eligible for sourcing by global firms.

While Commerce and Industry Ministry has indicated willingness to accommodate IKEA demand, Sinha said the Micro, Small and Medium Enterprises (MSME) Ministry has not been consulted on the issue.

"They (Department of Industrial Policy and Promotion - DIPP) are supposed to consult us. How can I assume role of DIPP ? Let it consult us, we will give our views. I have been saying loud and clear I don't have a (consultation) paper," he said.

IKEA also has not consulted the MSME Ministry, Sinha said. The furniture retailer plans to invest Rs 10,500 crore to set up about 25 stores in India.

"The market is getting opened and what is wrong if the country is saying that procure from us," he said.

Besides, IKEA had asked the government to give a time period of 10 years to fulfill the mandatory condition of sourcing.