Government firm on 30% procurement from small industries.
By R. Chandrasekaran
CHENNAI: The biggest retailer in the world, Walmart, seems to have failed to convince the Indian government officials on the question of the contentious sourcing clause.
The officials of the Arkansas-based retailer reportedly met the Indian government officials recently and explained its inability to comply with the sourcing clause for the multi-brand retail sector. At least 30 percent of the procurement is required to be made from small industries.
The Indian government had opened up the retail sector for foreign direct investment (FDI) in September last year and could attract only IKEA as a big ticket investment proposal so far. This has obviously made the Commerce and Industry minister Anand Sharma to advise retailers to first make use of the 51 percent FDI norms in retail segment before seeking to raise it to 74 percent.
The granting of FDI in retail sector came against strong opposition from various political parties in different states. Therefore, it is quite understandable how much the minister was frustrated by the failure to make use of the current norms.
The Department of Industrial Policy and Promotion (DIPP) authorities seemed to have explained to Walmart officials the difficulties in easing the sourcing provision since it is also a politically sensitive issue. The retailer is said to have been ready to source only up to 20 percent from small industries.
The government had stipulated 30 percent of the value of procured products, manufactured or processed, to be sourced from small industries from India, to protect small industries
Given the opposition to global retailers in different states in India from some of the big political parties, there is also a strong opinion that retailers will prefer to wait until next year Parliament elections are slated for May since any change in government could upset their game plan.
To contact the author, email to rchandrasekaran@americanbazaaronline.com