The Department of Industrial Policy & Promotion (DIPP) of the government of India has accepted several key demands put forward by the Swedish furniture retailer, IKEA relating to its huge investment plans for the country.
The officials have agreed to relaxation of the 30 per cent mandatory sourcing requirement from the beginning of its operations. The department has also accepted the definition of `small scale' sector of the company that has to mandatorily source products under the rules for 100 per cent foreign direct investment in single-brand retailing.
The officials have hinted that they might allow the company to operate retailers under names that are different from the one applying for the permits to enter the country. The authorities might also exclude `taxes and duties' while defining the value of products that are compulsorily sourced locally. The series of concessions will allow the move to speed up its investment plans and might send a positive signal to foreign investors about investing in the country.
India's union Commerce and Industry Ministry had earlier said that the IKEA Group is planning to invest in single brand retail business model in the country, which will be operated by a 100 per cent subsidiary. The proposal from IKEA is the largest investment in the single-brand retailing ever.
The proposal needs an approval from the Cabinet Committee on Economic Affairs (CCEA) as it involves an investment of more than Rs. 1,200 crore. As per the plans, the company will invest Rs. 4,200 crore to set up 10 stores in the country in the first stage. The remaining Rs. 6,300 crore will be used to set up 15 more stores.
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