Govt relaxes local sourcing rule for foreign firms

The Dollar Business Bureau 

The government will provide exemption to foreign companies such as Apple Inc, which are coming with cutting edge and state-of-the-art technology, from the mandatory domestic sourcing norms under the single-brand retail for up to 3 years.

Ramesh Abhishek, Secretary, Department of Industrial Policy and Promotion (DIPP) said that these foreign companies will be provided a 5-year period to comply with the mandatory local sourcing norms of 30 percent, after the completion of the exemption period. This is being done to generate more jobs and encourage the growth of micro, small and medium enterprises (MSMEs) in the country.

“For us, local sourcing is an important issue because we need to create jobs and interest of MSMEs is very important. Companies whose products will be certified as state-of-the-art will get exemption for up to 3 years,” the secretary said.

Specifying that after the exemption period is completed, the foreign firms in the next 5 years will have to meet the local sourcing norm at a yearly average rate of 30 percent. After that, the company has to abide by the norm on a yearly basis.

The government’s recent decision assumes great importance specifically to Apple Inc as it had sought full exemption from the 30 percent local sourcing provision. However, the finance ministry had declined the request then. Now the iPhone maker would have to apply again to get the benefits of the revised policy.

Asked to throw more light on the term ‘cutting edge’, the secretary said that his department is in discussion with the ministry of finance on this. Speaking on the recent changes in the foreign direct investment (FDI) regime for the food processing segment, Abhishek said the Govt. has made it clear that there were ‘no conditions’ for international investors in this. “The farmers would be benefitted with this decision. A foreign investor would anyway invest in front-end and back-end, so there was no need to put any conditions for them,” he had added.