Le Eco, Xiaomi seek exemption from 30% local sourcing norm

“Norm of 30% for branded tech production makes little sense. Glad this govt realises this,” tweeted Amitabh Kant, the CEO of NITI Ayog, following news that the government has allowed Apple to set up its own retail stores without having to comply with the 30% minimum local sourcing requirement.

Kant is not the only one relieved. Other companies have followed in Apple’s footsteps to apply for the waiver. Interesting, two of them, just like Apple, are cellphone makers — Chinese companies Xiaomi and Le Eco. According to government sources, both are likely to be exempted from minimum sourcing norm.

The argument in favour of retaining the local sourcing norm is growing weaker by the day, experts said. “The idea to have local sourcing norm in the FDI policy itself was to ensure that global majors come and create jobs. Such a clause helps SMEs grow in the country,” said a former DIPP secretary, who was key in the policy formation for single-brand retail.

Global players, such as, IKEA and H&M, have been in talks with the government to bring further changes in the sourcing norm.

The norms have undergone several changes over the years. First, the government replaced the word “mandatory” with “preferably” and later on created a caveat, saying, companies, which bring “cutting edge and state-of the-art technology” to the country can open single-brand outlets without 30% compulsory sourcing of materials, subject to government approval.

The Centre allowed 100% FDI in single-brand retail in January 2012 — 49% through the automatic route, and beyond that with the approval of the Foreign Investment Promotion Board.