Opening of store in India subject to full govt approval: IKEA
New Delhi: Swedish home furnishings major IKEA will open stores in India only after the government approves its application in entirety, although sourcing norms for FDI in single-brand retail have been diluted.
The government on Friday tweaked the sourcing norms for FDI exceeding 51 per cent in single-brand retail and diluted the previous condition of sourcing 30 per cent of requirements “mandatorily” from micro, small and medium enterprises (MSMEs) in India by stating that sourcing should be done “preferably from MSMEs”.
This was one of the major issues raised by IKEA while approaching the government in June this year with its plans to invest 1.5 billion euro (Rs 10,500 crore) in India to set up 25 stores.
“We are positive to the development and remain hopeful that we will soon be able to set up our first store in the country, subject to 100 per cent approval of our application to the Government of India,” an IKEA spokesperson told PTI.
When contacted, a government official said approval of any application would be based on the latest policy guidelines. The company had earlier said that “the conditions applied to local sourcing from SMEs might be difficult for it to live up to”.
It had also proposed that adherence to the mandatory sourcing requirement must be computed for cumulative periods of 10 years each from the date of approval. Besides, the sourcing values would include export values of sourcing by the Group companies from the small industries.
“The IKEA Group has submitted its application to start retail operations in India. We are waiting for the government to go through the approval process.
“Once our application is approved by the Government of India, we will be able to share more information about our intentions to establish retail operations in India,” the spokesperson said.
As part of the modifications announced last week, the government had said foreign firms, which want a relaxation of the 30 per cent procurement norms, would have to to set up manufacturing facility in India. “We will now look into the details of this decision of the Indian Government,” the spokesperson said.
When asked whether the Scandinavian firm is sticking to its earlier investment plans, the spokesperson said: “The investment plan of 1.5 billion euro and 25 stores is an estimate based on our previous experience in other markets and our belief that India has a huge investment potential.”
India is a “very interesting and important potential market” for the IKEA Group and it believes that entry in this market is a long-term commitment, he added. As per the proposal to the government, IKEA would invest 600 million euro (Rs 4,200 crore) in opening 10 stores in the first stage. The remaining 900 million euros (Rs 6,300 crore) would be used to open 15 more stores.
Besides, it also had proposed to set up restaurants, food mart, nursing homes and publications under its brand name.