The government is likely to allow Walmart to indirectly source 10% of its raw material through agents from small and medium enterprises.
The department of industrial policy and promotion has asked the retail giant to come up with its own sourcing model, including ways of indirect sourcing, but within the contours of the existing norms for sourcing at least 30% from Indian SMEs.
This means that Walmart can source 20% directly and the rest 10% through agents.
“We have asked them to give their own sourcing model and that has to be done within the present policy even if they want to source indirectly. They have to tell us how they do it,” said a senior DIPP official.
The company was told so after its officials - Asia CEO Scott Price and India head Ramnik Narsey - met DIPP secretary Saurabh Chandra last week and bargained for more besides seeking clarity on the sourcing norms. Price is expected to come back with a draft proposal in the first week of October.
In July, the US-based retailer had expressed its inability to the government in meeting the 30% sourcing norm in the multi-brand retail sector stating that it could source only 20% from the Indian small and medium industries.
As per the FDI policy for multi-brand retail trading, at least 30% of the value of procurement of manufactured/processed products have to be sourced from Indian small industries.
Sources said that the company is mulling various channels and modalities of sourcing through intermediaries and wanted more clarity on whether this would be a violation of the policy.
The department has asked for a written communication from the company.
Walmart is present in India as part of Bharti-Walmart, which is a 50:50 cash-and-carry joint venture with Bharti Enterprises.
“As said before, India is an important market for us. We continue to study the implications of the current FDI policy on our business and appreciate the government’s willingness to consider our requests to provide clarity on the conditions contained in the policy. Walmart’s mission is to save people money so they can live better,” said a Walmart India spokesperson.