New Delhi: The Union Cabinet has announced its second round of foreign direct investment (FDI) reforms by easing the 30 per cent local sourcing norm in single-brand retail (SBRT). According to the latest move, the domestic procurement for exported goods will now qualify for inclusion under the 30 per cent sourcing rules.
Announcing this, Railway and Commerce Minister Goyal said, “With a view to providing greater flexibility and ease of operations to SBRT entities, it has been decided that all procurements made from India by the SBRT entity for that single brand shall be counted towards local sourcing, irrespective of whether the goods procured are sold in India or exported.”
The existing policy also allows incremental sourcing for global operations by the non-resident entities undertaking single-brand retail trading, either directly or through their group companies, will also be counted towards local sourcing requirement for the first five years.
However, the prevalent business models involve not only sourcing from India for global operations by the entity or its group companies, but also through an unrelated third party.
Mr Goyal further said that the current cap of considering exports for five years only is proposed to be removed, to give an impetus to exports.
The extant FDI policy provides that 30 per cent of the value of goods have to be procured from India if the SBRT entity has more than 51 per cent FDI. Besides, the local sourcing requirement can be met as an average during the first 5 years, and, thereafter, annually.
In order to cover such business practices, it has now been decided that ‘sourcing of goods from India for global operations’ can be done directly by the SBRT entity or its group companies, or indirectly by them through a third party under a legally tenable agreement.
The extant policy provides that only that part of the global sourcing shall be counted towards the local sourcing requirement which is over and above the previous year’s sourcing value.