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No proposal to dilute FDI rules in single brand retail: MSME

business Updated: Aug 30, 2012 15:26 IST
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The Micro, Small and Medium Enterprises (MSME) ministry on Thursday said it has not received any proposal to dilute guidelines related to foreign direct investment in the single-brand retail sector.

Foreign retailers who want to set up 100% single brand retail stores in India have raised concerns over the mandatory condition of 30% sourcing from small and cottage industries.

"There is no proposal with this ministry at present for diluting FDI guidelines in single brand retail," MSME minister Vayalar Ravi said in a written reply to the Rajya Sabha.

Ravi said the guidelines for FDI in retail were approved by the cabinet with inputs from all concerned ministries.

The government has eliminated 51% 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% will have to source at least 30% of their merchandise from the domestic micro and small enterprises.

Swedish furniture firm IKEA, who has moved application for raising FDI up to 100%, has sought from the government the easing of norms for compulsory procurement from the micro and small enterprises. At present, a company up to investment of Rs 5 crore qualifies to be called MSE.

The IKEA argument 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.

The furniture retailer plans to invest Rs 10,500 crore to set up about 25 stores in India.

In an another reply, Ravi said several suggestions for the amendment to the Micro, Small and Medium Enterprises Act 2006 have been received from various associations.

Earlier this month, commerce and industry minister Anand Sharma has said that the government is working on revising the definition of MSME to help foreign retailers.