MNCs get flexibility to test market products

NEW DELHI: The government has liberalised the policy on FDI in trading sector whereby MNCs will get more flexibility in carrying out test marketing of new products in the country.
Over the last few months, a lot of issues had cropped up on the applicability of policy on FDI in the trading sector, which were holding up many FDI approvals of MNCs for test marketing.
The government has now made certain decisions on these issues following inputs from the commerce ministry, which is the nodal department for FDI in the trading sector.
Removing the haggling over sectoral objections by various ministries, the government has decided that the commerce ministry is the administrative ministry and all proposals must be considered as per the existing policy.
Now, the policy has to be applied uniformly unless the relevant sectoral policy imposes specific restrictions from sectoral angle.
Many proposals have been held up as various ministries were raising some objection or the other on trading activities. Although imports are allowed under the Exim policy, several ministries were not supporting these proposals.
It has also been decided that non-fulfilment of test marketing obligation of not starting manufacturing after two years does not make a company ineligible to be considered for other approvals for carrying out trading activities.
As regards the violation of test marketing obligation, it would be examined on a case to case basis and in the absence of sufficient justification for non-fulfilment of the condition, suitable action must be taken under Fema provisions.
In addition, when a company obtains an approval for undertaking test marketing but does not avail of the facility, there should be no objection if it wants to surrender the approval and obtain separate approvals for other permitted modes of trading.
However, test marketing permission will be granted only when the item proposed to be test marketed is not ordinarily available in the Indian market or even if available is high tech, requiring specialised after sales service.
The government has also clarified that all windows under the FDI policy for trading activity are open to a company for more than one mode.
As per the current policy, FDI upto 100% is permitted for specified activities such as exports, bulk imports with ex-bonded warehouse sales and carry wholesale trading activity and project imports.
Under the test marketing window, it is allowed when a company has approval for manufacture and it is allowed for two years, but investments in manufacturing have to commence simultaneously with test marketing.