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    Dec 2009


    Default IKEA seeks relaxation of sourcing norms

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    Swedish firm IKEA, which has proposed to invest Rs. 10,500 crore to set up single brand retail stores in India, has asked the government that it must be allowed to continue sourcing from small units even after the vendors have crossed the mandatory $1 million investment limit.

    It has also proposed that the calculation of the 30 per cent norm be done for cumulative periods of 10 years of operations starting with the approval of the present application.

    As per the present single brand FDI policy, global retailers would have to source 30 per cent of their requirement from Indian small industries which have a total investment in plant and machinery not exceeding $1 million.

    The company, which has filled the application with the Department of Industrial Policy and Promotion (DIPP) on Friday, said that if IKEA group were to comply with this norm, such units will very soon outgrow the stipulated valuation (of $1 million) and become large set-ups.

    Owing to the restriction contained in the FDI policy, such small industries may lose out on vast volumes of business from the group, it said.

    Moreover, it said that if the company would keep on changing its vendors, such abrupt change would also disrupt the quality of the products that would be released in the market and also the supply chain operations of IKEA group.
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