FDI in retail: Sourcing form MSMEs must, says Ministry

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Saurabh Gupta | 26 Jul, 2013
The Ministry of Micro, Small and Medium Enterprises (MSMEs) Thursday said that the global retailers must have to source 30 percent of their annual purchases from micro and small enterprises (MSEs).

The the representatives of the world's largest retailer, Walmart, which had plans to open its multi-brand retail in India, had met Department of Industrial Policy and Promotion (DIPP) officials last week and said that they will not be able to meet the mandatory 30 percent sourcing norm and can only source about 20 percent.

"Not preferable, it is a must. We are proposing it should be a must," the Minister of State (Independent Charge), Ministry of MSME, K H Muniyappa told media on the sidelines of the an event jointly organized by FICCI and Google in New Delhi on Thursday.

When asked about the demand of global retailers, Muniyappa said a global retailer must not be allowed to source from MSEs, three years after the unit crosses the investment limit of USD 1 million.

As per current policy, multi-brand retailers must procure 30 percent of products mandatory from micro and small enterprises (MSEs) with an investment in plant and machinery not exceeding USD 1 million.

Swedish furniture firm IKEA, who has moved application for raising FDI up to 100 percent, also wants that India should relax norms FDI norms as they are not able to comply with the sourcing conditions implemented in the single-brand retail policy.

Meanwhile, Additional Secretary in the MSME Ministry, Amarendra Sinha too said that the foreign retailers will have to source at least 30 percent from MSEs.

Also a parliamentary panel has recently recommended the government to set up a a regulatory authority to look into the problem concerning FDI in the multi-brand segment and the impact of FDI in multi-brand retail on MSMEs.

Replying on this, Sinha told SME Times,"We welcome the move taken by the Honorable parliamentary panel."

According to DMK leader and Chairman of the Parliamentary Standing Committee on Industry, Tiruchi Siva if multi-brand retail chains are not regulated well, it will impact MSMEs, farmers and domestic farm traders.

The panel also suggested the MSME ministry should commission a survey to assess the benefit and losses of previous FDI policies on the MSME sector to ascertain if they have created any back-end infrastructure, imparted skills to domestic manpower or upgraded managerial skills, as is being envisaged in the current FDI policy, reports media.