1. Local sourcing conditions: IKEA for ‘less detailed regulations’

Local sourcing conditions: IKEA for ‘less detailed regulations’

Amid a debate over local sourcing conditions for foreign firms to open retail stores in India, Swedish furniture major IKEA says it is better to have "less detailed regulations" as business will eventually go the place that has the best preconditions to do so.

By: | Almhult | Published: June 12, 2016 3:50 PM
IKEA will open its first store in India at Hyderabad in the second half of 2017. It has also bought land in Mumbai as part of its expansion in India even as it scouts for more sites in Delhi-NCR, and Bengaluru.(Reuters) IKEA will open its first store in India at Hyderabad in the second half of 2017. It has also bought land in Mumbai as part of its expansion in India even as it scouts for more sites in Delhi-NCR, and Bengaluru.(Reuters)

Amid a debate over local sourcing conditions for foreign firms to open retail stores in India, Swedish furniture major IKEA says it is better to have “less detailed regulations” as business will eventually go the place that has the best preconditions to do so.

The company, which is slated to open its first store in India next year, however, said it will do whatever it takes to meet the 30 per cent sourcing requirements in India for operating its retail chain.

“Well I am happy about the development which India has taken to enable retailers like us to establish ourself in India and you have 30 per cent rule for sourcing. We will do whatever of course to fulfil that. We see many opportunities that will be good for IKEA and good for India,” IKEA Group President and CEO Peter Agnefjall told PTI.

When asked if the sourcing conditions are reasonable, he said: “I think, in a way that at the end of day, it’s better for the world for more freedom of trade we can have, and with less detailed regulations, because then the business would end up where you actually have the best preconditions to do so.”

Elaborating his point, Agnefjall said: “For instance for textiles, which is super strong in India and it’s not so good in Sweden, it’s better that we actually do it (source) in India for more countries and we will do something else in Sweden.”

However accepting India’s preconditions, he said: “regulations are what regulations are, and we have accepted them and we will make sure that we will fulfil the requirements set up by the Indian government.”

Currently a debate is on over relaxing local sourcing requirements for Apple Inc with India’s Foreign Investment Promotion Board (FIPB) writing to the Department of Industrial Policy and Promotion (DIPP) to relax the sourcing requirement for foreign-funded single brandretailers selling products with “cutting-edge” technology.
Agnefjall said IKEA has agreed that five years from store opening in India it would fulfil requirements and “that’s the target set on which we are working upon”.

He said initially it was “little bit unclear as where does it count from store opening or from the time you establish the company”.

“For us it is important it goes from store opening because we have a very long lead time as we are securing the land, which needs to be prepared, stoned and have building permit etc before you can construct the store,” Agnefjall said.

He, however, welcomed the steps taken by the Indian government to enable the company set up shops in the country.

IKEA will open its first store in India at Hyderabad in the second half of 2017. It has also bought land in Mumbai as part of its expansion in India even as it scouts for more sites in Delhi-NCR, and Bengaluru.

The company, which received government approval in 2013 for its Rs 10,500 crore proposal to open retail stores under 100 per cent FDI, plans to open 25 stores by 2025 in nine Indian cities.

Tags: Ikea
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