The Cabinet on Wednesday approved a three-year exemption from 30% annual local sourcing required for foreign single-brand retail companies with “cutting-edge technology”, paving the way for global players like Apple to open their first retail store in India.
Also, the companies like Apple will be given the flexibility to source an average of 30% locally over a five-year period once the three-year exemption from the sourcing rule is over. These changes were announced last month by the department of industrial policy and promotion. Upon completion of the first three years, such entities will be given the flexibility to source according to their operational needs for the next five years so that they don’t face much of a problem to enhance their manufacturing base.
However, by the end of the fifth year, such entities must have sourced an average of 30% locally over that five-year period. This means they may not strictly adhere to the annual 30% sourcing rule in any of those five years. Once the relaxed regime is over, they are mandated to comply with the mandatory 30% sourcing rule every year.
Apple’s technology has already been described as “cutting-edge” by a government panel headed by DIPP secretary Ramesh Abhishek. Similarly, Chinese company LeEco will be subjected to the same conditions if its claim of having “cutting-edge” technology is endorsed by the panel.
However, another Chinese company Xiaomi, which recently withdrew application for such a waiver, will have to comply with the mandatory 30% sourcing rule from the beginning should it wish to set up its own retail store. The latest move assumes significance after conflicting signals in recent months over Apple’s bid to set up shop in India. Apple CEO Tim Cook visited India for the first time in May with an aim to tap the world’s fastest-growing smartphone market.