30 p.c. sourcing from Indian SMEs only

NEW DELHI, INDIA: Ahead of the official notification allowing up to 51 per cent FDI in multi-brand retail, the government on Monday clarified that 30 per cent mandatory procurement from small and medium enterprises (SMEs) clause applied only to Indian enterprises and not globally.

“Sourcing of a minimum of 30 per cent from Indian micro and small industry having capital investment of not more than $1 million has been made mandatory,” the ministry of commerce and industry said in a statement.

It said up to 51 per cent foreign equity investment in multi-brand retail sector would be allowed through the government approval route, subject to adequate safeguards for domestic stakeholders.

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The official documents, released last week after the cabinet decision to open up the multi-brand retail sector for foreign equity investment, said it will be mandatory for retailers to source at least 30 per cent of the goods from SMEs.

However, there was no clarity whether the mandatory 30 per cent sourcing will be from Indian enterprises or globally.

Earlier, the Federation of Indian Chambers of Commerce and Industry (FICCI) urged the government to clarify the issue.

In the clarification note, the government said mandatory sourcing of at least 30 per cent goods will help boost the growth of SMEs in the country.

“This will provide the scales to encourage domestic value addition and manufacturing, thereby creating a multiplier effect for employment, technology upgradation and income generation,” it said.

The cabinet headed by prime minister Manmohan Singh last week gave green signal to allow up to 51 per cent FDI in multi-brand retail, and raised the limit in single-brand retail from 51 per cent to 100 per cent.

The official document said the foreign retailers would be allowed to operate only in those cities where the population is more than 1 million.

“The policy rollout will cover only cities with a population of more than 1 million,” As per 2011 census, of 7,935 towns and cities in the country, only 53 cities have over 1 million population.